Which statement regarding negative cash balances is true?
A)The amount is offset against other current assets because users need to know net current assets.
B)The amount is shown as a current liability because a company cannot have a cash balance below zero.
C)The company must obtain a loan to bring the cash balance to zero before financial statements are prepared.
D)The negative cash balance is included as a current asset and discussed in a footnote to the financial statements.

Question

Quizplus · Accepted Answer

A negative cash balance is shown as a current liability because it indicates an overdraft, which is a liability, as a company cannot have a cash balance below zero.

Which Statement Regarding Negative Cash Balances Is True