Is restricted cash a current asset?

If the restriction on the cash is due to be lifted within a year, it’s likely to be classified as a current asset. Conversely, if the cash is restricted for a period extending beyond a year, it is usually reported as a non-current asset on the balance sheet. The role of restricted cash on a balance sheet is significant.

Can restricted cash be used for other purposes?

Cash that has been deemed restricted cannot be used for other purposes. Restricted cash is classified as either a current asset, which is used up within one year, or a non-current asset, which are long-term assets. As a result, if the restricted cash is expected to be used in the short-term, it is classified as a current asset.

What happens if cash is restricted for a year?

The liquidity ratio can be affected by the categorization of restricted cash. If included in current assets, it can cause the liquidity ratio to rise, which could be misleading if this cash is not truly accessible for meeting short-term obligations. What are some examples of situations when cash would be restricted for over a year?