Accountancy Part BCash Flow Statement

Identify the period, from the date of acquisition, for which an inves…

Identify the period, from the date of acquisition, for which an investment normally qualifies as cash equivalents.

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → Three months or less

NCERT (2026-27 edition):
Cash and Cash Equivalents – “… 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.”