Compensating balance: A compensating balance is a minimum amount of cash that must be maintained by the debtor in his bank account for the security purpose of a loan or a commitment to lend. To define: A compensating balance and also describe how the compensating balances are reported in financial statements.

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Chapter 7, Problem 7.5Q

To determine

Compensating balance:

A compensating balance is a minimum amount of cash that must be maintained by the debtor in his bank account for the security purpose of a loan or a commitment to lend.

To define: A compensating balance and also describe how the compensating balances are reported in financial statements.

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