Restricted Cash

Restricted Cash refers to cash that is not available for immediate use by a company because it is set aside for a specific purpose. This cash is often held in separate accounts and is typically reserved for future liabilities or obligations, such as debt repayments, legal settlements, or specific projects.

Examples of restricted cash include:

• Cash held in Escrow accounts for future real estate transactions.
• Funds earmarked for Capital Expenditures, such as a new facility or equipment.
• Deposits required by lenders as Collateral for loans.

Cases where restricted cash might be reported include:

• A construction company holding cash for a specific project that cannot be used for other operational costs.
• A Corporation setting aside cash for a pending legal settlement to ensure funds are available when needed.
• A bank requiring a business to maintain a cash reserve as part of a loan agreement.