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Which of the following is/are true about cash equivalent? |
More Liquid Short-term Investment Minimum risk Maturity of 3 months or less than 3 months All the above |
All the above |
The correct answer is option 4- All the above. All the above are true about cash equivalent. As per AS-3, ‘Cash’ comprises cash in hand and demand deposits with banks, and ‘Cash equivalents’ means 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. An investment normally qualifies as cash equivalents only when it has a short maturity, of say, three months or less from the date of acquisition. |
