Question

X Ltd. purchased debentures of ₹ 10 lacs of Y Ltd which are redeemable within 3 months . How will you show this item as per AS 3 while preparing cash flow statement for the year ended on 31st March 2015.​

Answer 1

Answer:

As per AS 3 on 'Cash Flow Statement', cash and cash equivalent consist of cash in hand, balance with banks and short-term, highly liquid investment. If investment of ₹ 10 lacs, made in debentures is for short-term period then it is an item of 'Cash equivalent'.

However, if investment of ₹ 10 lacs made in debentures is for long-term period then as per AS 3, it should be shown as cash flows from investing activities.