Elements of Cash
As per AS 3, issued by the Council of the ICAI, ‘Cash’ include:
(a) Cash in hand,
(b) Demand deposits with banks, and Cash equivalents include:
(a) Components
➢ Short term highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value
➢ Securities with short maturity period of, say, three months or less from the date of acquisition
Objective
Deploy, for a short period, idle cash required to meet short-term cash-commitments.
Examples
Acquisition of preference shares, shortly before their specified redemption date, bank deposits with short maturity period, etc.
Conclusion:
Thus, cash flow statement deals with flow of cash funds but does not consider the movements among cash, bank balance payable on demand and investment of excess cash in cash equivalents. Examples are cash withdrawn from current account, cash deposited in bank for 60 days, etc.
No comments:
Post a Comment