CA Intermediate · Advanced Accounting · AS 3 Cash Flow Statement
Gupta Ltd held cash Rs 2,00,000, bank balance Rs 5,00,000, a 2-month fixed deposit Rs 3,00,000 (original maturity at purchase) and a 12-month fixed deposit Rs 4,00,000 at the year end. Bank overdraft repayable on demand and forming part of cash management was Rs 1,50,000. Cash and cash equivalents per AS 3 at year end is:
Cash and cash equivalents are Rs 8,50,000. Cash, bank and the two-month deposit total Rs 10,00,000; the twelve-month deposit is excluded as it is not short term, and the on-demand overdraft of Rs 1,50,000 used in cash management is deducted.
- ARs 8,50,000Correct
- BRs 10,00,000
- CRs 14,00,000
- DRs 12,50,000
Explanation
Cash 2,00,000 + bank 5,00,000 + short-term deposit 3,00,000 = 10,00,000. The 12-month deposit is not a cash equivalent. Overdraft repayable on demand and integral to cash management is deducted: 10,00,000 - 1,50,000 = 8,50,000.
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