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CA Intermediate · Advanced Accounting · AS 3 Cash Flow Statement

Yamuna Exports Ltd held a fixed deposit of Rs 2,00,000 with a bank, originally made for 2 years and now maturing in 2 months. It also holds a treasury bill of Rs 1,50,000 bought 2 months before maturity, and cash Rs 40,000. Under AS 3, what is the amount of cash and cash equivalents from these items?

Cash and cash equivalents are Rs 1,90,000. The treasury bill bought two months before maturity qualifies as a cash equivalent along with cash, but the fixed deposit does not, since equivalence is judged by original maturity of three months or less at acquisition.

  1. ARs 1,90,000Correct
  2. BRs 3,90,000
  3. CRs 1,50,000
  4. DRs 3,50,000

Explanation

Cash equivalents are short-term investments with original maturity of three months or less when acquired. The fixed deposit had an original maturity of 2 years, so it does not qualify. Treasury bill 1,50,000 plus cash 40,000 = 1,90,000.

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