Advertisements
Advertisements
Question
Short Answer Question
State the meaning of the term: Cash Equivalents
Solution
Cash equivalents are short-term, highly liquid investments that are easily convertible into cash and which are subject to an insignificant risk of change in value. In other words, cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or any other purpose. An investment held for short-term maturity, say three months can be regarded as cash equivalent. Some examples of cash equivalents are treasury bills, commercial papers, etc.
APPEARS IN
RELATED QUESTIONS
State which of the following would result in inflow/outflow or no flow of Cash and Cash Equivalents:
(a) Sale of Fixed Assets, Book Value ₹ 1,00,000 at a profit of ₹10,000.
(b) Sale of goods against cash.
(c) Purchase of machinery for cash.
(d) Purchase of Land and Building for ₹10,00,000. Consideration paid by issue of debentures.
(e) Issued fully paid Bonus Shares.
(f) Cash withdrawn from bank.
(g) Payment of Interim Dividend.
(h) Proposed Dividend.
Fill in the blank.
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 are called __________.
State with reason whether old furniture written off would lead to inflow, outflow or no flow of Cash and Cash Equivalents.
From the following information find out the inflow of Cash by sale of Office equipment
| 31st March, 2022 | 31st March, 2021 | |
| Office Equipment | ₹ 2,00,000 | ₹ 3,00,000 |
Additional Information:
Depreciation for the year 2021-22 was Rs. 40,000
Purchase of Office Equipment purchased during the year Rs. 30,000
Part of Office Equipment sold at a profit of Rs. 12,000
Which of the following transactions will result into flow of cash?
Statement I: Sale of Marketable Securities will result in no flow of Cash.
Statement II: Debentures issued as collateral security will result in inflow of cash.
