CASH EQUIVALENTS
Cash Equivalents are investments that are readily
convertible into cash. The investment must be short-term,
usually with a maximum investment duration of 90 days. If
an investment matures in more than 90 days, it should be
classified in the section named “investments”. Cash
equivalents should be highly liquid and easily sold on the
market.
FEATURES OF CASH EQUIVALENT
Definite amount
High liquidity
Less risk
Short-term investment
TYPES OF CASH EQUIVALENTS
Treasury Bills
Commercial Paper
Certificate of Deposit
Money Market Funds
Repurchase Agreement
TREASURY BILLS are commonly referred to as “T-bills”. These securities issued by the United States
Department of the Treasury that mature in one year or less. Companies, financial institutions and individuals
who buy T-bills lend the government money which the government pays back upon maturity. T-bills are sold at
a discount and redeemed at face value.
For example, a 10,000 T-Bill with a three-month maturity and a 1% discount rate would be purchased for 9,900
and redeemed for 10,000 at maturity, resulting in a 100 gain.
COMMERCIAL PAPER is short-term, unsecured debt used by big companies to raise funds to meet short-
term liabilities such as payroll. Corporations issue commercial paper at a discount from face value and promise
to pay the full value on the maturity date designated on the note. Maturities range from one to 270 days.
CERTIFICATE OF DEPOSIT is a type of
savings account with a financial institution. It
represents a certain amount of a saver’s capital that
can’t be accessed by the saver for a specific period
of time. In return, for the use of their capital, the
financial institution pays savers a fixed rate of
interest. Savers can choose from CD terms ranging
from one-month to five-years.
MONEY MARKET FUNDS are mutual funds that invest in short-term debt securities, such as Treasury bills
and commercial paper. They are highly liquid and provide a diversified portfolio of investments. The return on
money market funds is slightly higher than that of Treasury bills and commercial papers, but they are still
considered low-risk investments.
REPURCHASE AGREEMENT are also known as repos.
Corporations and others use them as a form of very short-term
borrowing. With a repurchase agreement, an institution
temporarily transfer the securities to a lender as collateral, in
exchange for liquidity. The securities act as collateral on the
loan.
ADVANTAGE
Earns higher rate compared to cash in many savings account
May offer fixed rates of interest
Are generally considered to be safe investments
DISADVANTAGE
Often earns a much lower rate of interest than longer term, less liquid investment
Still subject to risk of default by the issuing entity
Fees or fines may apply for early redemptions of certain cash equivalents, such as CD’s
OPERATIONAL ACCOUNTING (also known as cost accounting) joins several other popular, lucrative
accounting specializations. The field focuses on financial concerns related to business operations across three
key areas: planning, directing, and controlling companies' operating costs.
OPERATIONAL ACCOUNTING – Operational is heavily focused on the operating activities of a business,
seeking to accurately record, measure, and refine them.
FINANCIAL ACCOUNTING – Financial is outward-looking — it’s about preparing and sharing financial
information and documentation with external stakeholders, tax agencies, and securities regulators, to name a
few.
MANAGERIAL ACCOUNTING – Managerial is a holistic approach that touches many different aspects and
is more focused on gathering and presenting financial information to be used in key business decisions. It’s also
about refining and streamlining the accounting structure and processes to ensure its serving management.
OPERATIONS ACCOUNTANT DUTIES
1. Preparing Revenue and Expense Reports: Operational accountants review previous accounting periods
and prepare reports based on financial records. This process often involves department- or project-
specific analyses.
2. Tracking Labor and Procurement Costs: These professionals track costs associated with labor, raw
materials, and supplies. They sometimes prepare expense reports related to employee hours and
materials cost comparisons.
3. Making Financial Projections: Operations accountants help their employers achieve internal financial
objectives. Reaching these goals requires detailed financial forecasts based on historical trends.
4. Creating Operational Budgets: These accountants also prepare department- and project-specific budgets.
Their budgets usually integrate findings from previous work in expense reporting, cost tracking, and
financial projections.
5. Managing Financial Accounts: Operational accountants sometimes oversee organizations' financial
accounts. These duties usually apply to smaller or mid-sized businesses with limited accounting
personnel.
KEY HARD SKILLS FOR OPERATIONAL ACCOUNTANTS
Specialized licenses and certification
Deep understanding of core accounting principles
Auditing knowledge
Proficiency with accounting technologies
KEY SOFT SKILLS FOR OPERATIONAL ACCOUNTANTS
Communication skills
Customer Service
Collaborative Personality
Professional Commitment
HOW DOES OPERATIONAL ACCOUNTING BENEFIT YOU?
• Create plans for future growth that are stretching but realistic for your company.
• Distribute proper resources throughout the business to provide what’s needed to grow.
• Reflect on progress, identify problematic areas, and implement effective changes.
