Short-term investments are investment entities in different financial instruments in the twelve-month period.The main forms of such investments - Acquisition of short-term promissory notes, bonds, savings certificates and bank deposits with a validity of less than one year.
Short-term investments - way to use now its available cash assets to give more benefits in the future, or at least a simple protection from inflationary losses.Due to the high liquidity, short-term investments can be equated to the means of payment and, therefore, provide the primary financial obligations of an economic entity.Also in financial management, they can be considered as cash assets, so it is applied to the same controls.
Short-term investments should be considered on the part of the subject, in which the activities of the funds received.After a year - is too little time to make a significant profit.That is why the acquired funds are mainly used for the purchase of materials and raw materials (all highly liquid balance sheet items).However, there are positive aspects to this kind of investment.First of all, the lowest risk of losing money, as the economic situation throughout the year can be most accurately calculate and predict.
However, in today's complex world, in addition to economic factors that have a significant impact on the economic activity of subjects, should be assessed and the political situation (for example, elections).Also of considerable importance is the rate of national currency.
Some lenders prefer to provide funds at a sufficiently high interest rates to minimize risks and losses associated with the absence of repayment of loans.
Short-term investments in financial instruments such as securities, are considered to be beneficial only if the acquired shares are traded on the financial market and can be readily converted into cash at any time.
In carrying out short-term investments, businesses and individuals are often simply seek the help of experts, the resulting income is calculated by comparing it with the risk that it may be several months investing surplus funds.Sometimes it is even used in the analysis of specific software.
In accounting, this type of investment is specified in the same account 58 that keeps records in the context of the list of assets.This may include shares that were purchased for the purpose of receiving benefits in the future, but with a validity of up to one year.This list indicated and types of securities such as debt, state and local authorities with a maturity of twelve months or involving the receipt of income in one year.On this account accounted for loans issued to other organizations with maturity and up to 12 months, and bank deposits.
Besides counting 58 mentioned type of investment can be taken into account in the subsidiary account 82, which, according to its title "Provisions for doubtful debts" generates profits for the purchase of short-term securities in the near future.Their value is determined similarly to the long-term and represents the actual cost of the investor.
Short-term investments on the balance sheet are shown in lines 250-253.Line 250 is the "accumulating" and consists of the sum of lines 251-253, which stands on its sub-accounts, namely:
- line 251 represents the amount of borrowed funds, which are issued to other business entities for a period of less than one year;
- 252 represents the amount of own shares that were bought back from shareholders;
- line 253 shows other short-term investments (bonds, securities and deposits).
