Understanding cash on hand in statement
This query is : Resolved
27 January 2017
Hi, I am trying to understand meaning of cash in hand as shown in Balance sheet of a small company. It says Cash at bank Rs. 4 crores and Cash in hand Rs. 3 crores as at 31st March. Is it possible to have so much cash on hand for a company? Can a co. Keep this much cash on any date?
Appreciate your professional views.
Thx
Appreciate your professional views.
Thx
27 January 2017
Isn't cash in hand of Rs. 3 crores on a very high side and seems mysterious?
30 January 2017
There is no issue if u can define the source of that much cash. If there is large cash transactions in the business then it is obvious for the company to keep that much cash in hand. But without any such reason, the company is just blocking the investment opportunity which results in less income to the company.
31 January 2017
U r welcome Deepak. U may hit the like button if u like my reply, to show ur appreciation.
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02 February 2017
MD of this co. arrested yesterday by UP STF in charges of financial fraud running in more than 3700 crores. company name Ablaze info solutions pvt ltd.
02 August 2025
Regarding **cash in hand** of Rs. 3 crores shown in the balance sheet of a small company, here are some professional points to consider:
1. **Unusually High Cash in Hand:**
Cash in hand of Rs. 3 crores is quite large, especially if the company is not involved in cash-intensive business like trading, retail, or similar sectors where large cash transactions are common.
2. **Legitimate Reasons for Large Cash Balance:**
It’s possible if the company has genuine business reasons, such as:
* Frequent cash sales or collections.
* Cash received but not yet deposited in bank.
* Holding cash for payments or business needs in the short term.
However, this should be well documented and explained in notes to accounts or by management.
3. **Concerns and Risks:**
Holding such a large amount in cash can raise red flags:
* Risk of theft or loss.
* Blocking working capital that could be earning interest.
* Potential tax scrutiny for unaccounted cash or financial irregularities.
4. **Auditor’s Role:**
Auditors would usually seek proof of cash balances through cash counts and verification. If large cash balances are unusual for the business, it might warrant deeper inquiry.
5. **Practical Advice:**
Companies are generally encouraged to keep minimal cash in hand, depositing excess funds in banks to earn interest and maintain transparency.
---
**In short:** While it’s *possible* for a company to have Rs. 3 crores in cash on hand, it’s uncommon and should be supported by strong business reasons and proper documentation. Otherwise, it may invite scrutiny or suspicion.
If you want, I can help draft a note on this for your records or provide checklist points for auditing such cash balances. Would that help?
1. **Unusually High Cash in Hand:**
Cash in hand of Rs. 3 crores is quite large, especially if the company is not involved in cash-intensive business like trading, retail, or similar sectors where large cash transactions are common.
2. **Legitimate Reasons for Large Cash Balance:**
It’s possible if the company has genuine business reasons, such as:
* Frequent cash sales or collections.
* Cash received but not yet deposited in bank.
* Holding cash for payments or business needs in the short term.
However, this should be well documented and explained in notes to accounts or by management.
3. **Concerns and Risks:**
Holding such a large amount in cash can raise red flags:
* Risk of theft or loss.
* Blocking working capital that could be earning interest.
* Potential tax scrutiny for unaccounted cash or financial irregularities.
4. **Auditor’s Role:**
Auditors would usually seek proof of cash balances through cash counts and verification. If large cash balances are unusual for the business, it might warrant deeper inquiry.
5. **Practical Advice:**
Companies are generally encouraged to keep minimal cash in hand, depositing excess funds in banks to earn interest and maintain transparency.
---
**In short:** While it’s *possible* for a company to have Rs. 3 crores in cash on hand, it’s uncommon and should be supported by strong business reasons and proper documentation. Otherwise, it may invite scrutiny or suspicion.
If you want, I can help draft a note on this for your records or provide checklist points for auditing such cash balances. Would that help?
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