Cash equivalents refer to short-term, highly liquid investments that are readily convertible into known amounts of cash. From the elements given below, identify which components are categorized under Cash Equivalents as per AS-3:(A) Demand deposits with Bank(B) Bills receivables(C) Treasury bill(D) Commercial Paper(E) Marketable SecuritiesChoose the correct answer from the options given below:
- A(A), (C), (D) and (E) only
- B(A), (B), (C) and (D) only
- C(A), (B), (D) and (E) only
- D(B), (C), (D) and (E) only
Solution & Step-by-step Explanation
According to Accounting Standard-3 (Revised) Cash Flow Statements:Demand deposits with Bank (A), Treasury bills (C), Commercial Paper (D), and Marketable Securities (E) are short-term, highly liquid financial instruments carrying insignificant risk of changes in value, hence forming part of Cash and Cash Equivalents.Bills receivables (B) is an account receivable asset under trade receivables, not a highly liquid cash equivalent security.