Restricted sources of funds are mainly various margin deposits. The deposit required to be paid by the bank when issuing acceptance bills or other bills still exists in the deposit account before the bill expires, which can be found in your deposit account in the bank and reflected in the final statement, but its use is restricted (so it is called restricted funds). After the issue of the bill expires, the consideration will be automatically paid with this part of the deposit.
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When compiling the cash flow statement, whether the deposit of letter of credit should be deducted from "cash" needs specific analysis, paying attention to the essence of whether the use of the deposit is restricted. Restricted use shall be deducted from the ending cash.
The definition of cash and cash equivalents in cash flow statement by accounting standards:?
1. Cash refers to the cash in stock and the deposits that can be used for payment at any time. Deposits that cannot be used for payment at any time are not cash.
2. Cash equivalents refer to investments held by enterprises with short term, strong liquidity, easy conversion into known amount of cash and little risk of value change. Among them, "short-term" generally refers to the expiration within 3 months from the date of purchase.
It can be seen from the above that if the letter of credit deposit can be used for payment within 3 months after the balance sheet date, it should not be deducted from "cash" when preparing the cash flow statement; Conversely, if it cannot be used for payment within 3 months after the balance sheet date, it should be deducted from "cash" when preparing the cash flow statement.
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