Compensating balances are a restriction on the use of a company's cash and should be
A) reported as a current asset.
B) reported as a noncurrent asset.
C) disclosed in the notes to the financial statements.
D) reported as a reduction of cash.

Question

Quizplus · Accepted Answer

Compensating balances are not considered an asset, liability, or reduction of cash, but rather a contractual obligation. They should be disclosed in the notes to the financial statements so that users of the statements are aware of any restrictions on the company's cash.

Compensating Balances Are a Restriction on the Use of a Company's