If a company maintains a compensating balance of cash,the company must

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If a company maintains a compensating balance of cash, it is required to disclose the compensating account arrangement in the financial statements. This is a requirement by the Generally Accepted Accounting Principles (GAAP). The compensating balance agreement is a form of bank service agreement in which the bank agrees to extend credit to the customer, provided that the customer maintains a minimum balance in the account. Therefore, it is crucial to disclose such agreements in the financial statements to provide transparency and ensure compliance with GAAP.

If a Company Maintains a Compensating Balance of Cash,the Company