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CA Intermediate · Advanced Accounting · AS 3 Cash Flow Statement

Anand Traders Ltd had cash in hand of Rs 40,000 and bank balance of Rs 2,10,000. It also holds a 90-day treasury bill bought 20 days before the year end for Rs 3,00,000 (original maturity 90 days from the purchase date), a fixed deposit of Rs 5,00,000 with 12 months original maturity, and a bank overdraft of Rs 70,000 repayable on demand that forms an integral part of its cash management. What is the closing figure of cash and cash equivalents?

Closing cash and cash equivalents are Rs 4,80,000. This includes cash, bank balance and the treasury bill with an original maturity of three months, less the overdraft repayable on demand. The twelve-month fixed deposit is excluded because its original maturity exceeds three months.

  1. ARs 4,80,000Correct
  2. BRs 10,50,000
  3. CRs 5,50,000
  4. DRs 4,10,000

Explanation

Cash equivalents are short-term investments with original maturity of three months or less. The treasury bill (3,00,000) qualifies, the 12-month fixed deposit does not. Overdraft repayable on demand and integral to cash management is deducted. Total = 40,000 + 2,10,000 + 3,00,000 - 70,000 = 4,80,000. Option Rs 5,50,000 ignores the overdraft.

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