Short term financial investments represent the investment of a business entity in certain financial instruments for one year.
Types of short-term financial investments
The following short-term financial investments are usually classified in this category:
- bond purchase savings certificates and short-term bills;
- placement of funds on a deposit for up to one year.
These investments are a form of temporary use of free cash resources of a business entity in order to receive a certain income and protect them from inflation.
Attachment Properties
Short-term investments have high liquidity. Therefore, they relate to means of payment and are the provision of various financial obligations of business entities. Short-term investments refer to cash equivalents and are a single entity.
What can be related to financial investments?
Firstly, these are municipal and state securities.
Secondly, securities of other business entities, which include debt securities, where the value and maturity date are determined.
Thirdly, a contribution to the authorized capital of other business entities, including subsidiary business entities.
Fourth, loans provided to other organizations.
Fifthly, deposits in banking institutions.
Non-current investments
Short term and long-term financial investments may not include:
- shares of own issue that are redeemed by the joint-stock company from its shareholders for the purpose of their subsequent sale or cancellation;
- bills issued by the drawer to the seller during settlements for goods sold, work performed or services rendered;
- investments of a business entity in both movable and immovable property, which is characterized by the presence of material form. These investments are provided by the subject for a certain fee for temporary use for future income.
Actual costs
The actual expenses incurred by a business entity in the process of acquiring assets such as short-term financial investments are:
- Amounts paid to the seller according to the concluded agreement;
- Amounts paid to organizations for consulting and information services related to the purchase of these assets;
- remuneration received by an intermediary organization or another person through whom the acquisition of assets as a financial investment occurred;
- other costs that are directly related to the purchase of such assets.
Primary Document Forms
The main primary documents necessary for accounting for transactions related to financial investments are as follows: acceptance certificate, agreement, securities issue certificate, extract from the register of shareholders.
Let us dwell on some of them. So, the contract is concluded taking into account the requirements that are established by Russian law in accordance with applicable law (for example, the Civil Code). This document is used in writing, for some of its types this form is mandatory. Separate agreements must be registered in accordance with the established procedure with the relevant organizations.The terms of the contract determine the rights and obligations that arise in the process of the transaction. In this case, we are talking about the cost, the procedure for payment of the subject of the contract, the timing and force majeure circumstances.
The act of acceptance and transfer is a document evidencing the transfer of various material values from one business entity to another. This fact of transfer (receipt) is certified by the signatures of the persons responsible for the transaction, and must also be sealed with their seals (if any, by business entities).
A security certificate appears when performing operations related to securities existing in the form of a document.
An extract from the register of shareholders must be provided at the request of the holder of securities on a specific date. This document contains information about the owner, registrar, the number of securities and their characteristics. The extract must be certified by the signature of the specific official and the seal of the registrar.
Short-term financial investments in the balance sheet
Summarizing all the above definitions of short-term financial investments, it should be noted that this type is represented by the value of such financial resources investments with a term of less than one year. Accounting for this value is carried out in accordance with the current regulatory framework.
These investments represent cash, short-term financial investments within which reflect the investments of business entities in bonds. It should be noted that in this case we are talking about loans granted for up to a year. In management, the acquisition of such state and private securities is carried out not only for the conquest of new sales markets, but also in the interests of profitable placement of monetary resources released for a certain period. Short-term financial investments are made by business entities for the period during which free cash is not needed.
