Cash equivalents include: (A) Commercial paper issue by a company (B)…

The correct answer is Option (2) → (A) and (B) only

Under AS-3, cash means cash in hand and demand deposits with banks; cash equivalents are short-term, highly liquid investments readily convertible into a known amount of cash with little risk of change in value.

(A) Commercial paper issue by a company — True. Commercial paper is a short-term money-market instrument, readily convertible into cash: a cash equivalent.

(B) Marketable Securities — True. Short-term marketable securities are treated as cash equivalents.

(C) Demand deposit — False. A demand deposit with a bank is part of cash itself, not a cash equivalent.

(D) Cash in hand — False. Cash in hand is cash, not a cash equivalent.

(E) Investment in shares — False. Investments in shares are excluded from cash equivalents, as their value can change.

Note: It seems that there is a mistake in the original question. The paper printed Option (1) as (A), (B) and (C) only and Option (2) as (B), (A) and (C) only, which is the same set of statements, so the question had no single valid answer. For the benefit of students and to ensure that the question is correct and has a single valid answer, Option (2) has been changed to (A) and (B) only.