Cash and cash equivalents (liquide middelen)
Cash and cash equivalents (liquide middelen) are cash in hand and immediately callable bank balances at the entity's disposal.
What do cash and cash equivalents mean?
Cash and cash equivalents (liquide middelen) are cash in hand and immediately callable bank balances at the entity's disposal.
A blocked account or overdraft needs separate assessment. A high bank balance at the balance sheet date says little about future payments.
How does it work?
The law counts as cash and cash equivalents the cash in hand, balances on bank and giro accounts, and bills of exchange and cheques (art. 2:372(1) DCC). RJ 228 values them at nominal value. For the balances, the extent to which they are not freely available is stated (paragraph 2), such as a G-account or a pledged deposit. If money is expected to be tied up for more than twelve months, RJ 228 places it under financial fixed assets.
An overdraft at one bank may not simply be netted against a balance at another: items that must be recognised separately may not be offset against each other (art. 2:363(2) DCC). According to RJ 115, offsetting is possible only with a sound legal instrument to settle both items net and the firm intention to do so.
Example
A contractor (BV) has on 31 December: cash € 400, current account € 31.600, savings account € 20.000, G-account € 8.500 and, at a second bank, an overdraft of € 12.000. Cash and cash equivalents: 400 + 31.600 + 20.000 + 8.500 = € 60.500. The notes state that € 8.500 is not freely available, because a G-account can only be used for payroll taxes and VAT. The overdraft of € 12.000 is shown under current liabilities to banks. Whoever nets shows € 48.500 and a balance sheet total that is too low.
In the annual accounts
Current assets on the balance sheet; reconciliation with the cash flow statement.
Difference from liquidity
Cash and cash equivalents are a balance sheet item: the money that is there at the balance sheet date. Liquidity is a judgement: can the entity pay its bills on time? That also counts the receivables coming in, the liabilities falling due and the credit facility at the bank.
Common mistakes
- Showing a blocked balance as freely available without explanation
- Always netting an overdraft
What to watch for
- Reconcile each bank account with the statement of the balance sheet date and count the cash.
- Cross items, money in transit between your own accounts, belong to cash and cash equivalents.
- Micro: the item is included in current assets (art. 2:395a(4) DCC). Small, medium-sized and large entities show cash and cash equivalents separately (art. 2:364(3) DCC).
Legal basis and source
art. 2:372 DCC
Frequently asked questions
Does a deposit with a notice period belong to cash and cash equivalents?
Yes, as long as it is a bank balance. If it cannot be freely withdrawn, you state this in the notes. If it is tied up for more than twelve months, you show it as a financial fixed asset.
May a cash balance be negative?
No. No more money can leave the cash box than is in it. A negative cash balance points to missing entries, usually unbooked receipts or a private deposit, and must be investigated before the year-end close.
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Preparing Dutch annual accounts?
Your first set of annual accounts is free, for every size class. Create an account and prepare the annual accounts of your Dutch company under Title 9 of Book 2 of the Dutch Civil Code.
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