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CA Intermediate · Advanced Accounting · AS 3 Cash Flow Statement

Himalaya Foods Ltd. has the following at year end: cash in hand Rs 40,000; balance with bank Rs 2,10,000; a 60-day treasury bill bought three months before the balance sheet date for Rs 1,50,000; and a fixed deposit of Rs 3,00,000 with maturity of 2 years from date of purchase. What is the figure of cash and cash equivalents under AS 3?

Cash and cash equivalents total Rs 4,00,000, comprising cash Rs 40,000, bank balance Rs 2,10,000 and the treasury bill of Rs 1,50,000 with short original maturity. The two-year fixed deposit is excluded because its original maturity exceeds three months.

  1. ARs 4,00,000Correct
  2. BRs 2,50,000
  3. CRs 7,00,000
  4. DRs 5,50,000

Explanation

Cash equivalents are short-term, highly liquid investments with original maturity of three months or less. The treasury bill qualifies, the two-year fixed deposit does not. Total = 40,000 + 2,10,000 + 1,50,000 = 4,00,000. Including the fixed deposit gives Rs 7,00,000, which is wrong.

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