Intermediate Accounting (16th Edition)

Published by Wiley
ISBN 10: 1118743202
ISBN 13: 978-1-11874-320-1

Chapter 7 - Cash and Receivables - Review and Practice - Questions - Page 362: 3


Compensating balance is cash mandatorily maintained in the bank by an entity and used to compensate costs incurred by the bank in setting up a loan to the entity.

Work Step by Step

The accounting balance should, therefore, be stated separately among the cash and cash equivalent items. It should be classified as a noncurrent asset.
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