Accounting for the centralization of cash


The centralization of cash, also known as cash pooling or cash management, must be accounted for in a rather specific way. For accountancy training Best school of accountancy In Pakistan. Focus on this accounting operation!
What is centralization of cash?
It is a technique of treasury management of corporate accounts, belonging to the same group. In reality, this accounting operation will make it possible to optimize the needs and cash surpluses, the financial expenses of the group concerned, and to manage the financial risks .
What are cash-pooling methods?
There are two methods of centralization of cash which it is essential to know in the context of an accounting mission. First of all, the so-called physical centralization, that is to say, the transfer of funds between the companies and the central account, namely the centralizing account. The second method is that of centralization without the circulation of funds, which means that each company continues to operate with its own lines of credit.
How to account for cash centralization?
The cash pooling is an accounting transaction simply consisting in debiting the account 451 Associates Current Account, and credit the account 512 Bank. It is also mandatory to account for interest in account 6615 Interest on current and deposit accounts or account 768 Other financial income.
The cash centralization operations are therefore simple to account, the moving account being mainly an associated current account.

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