According to AS-3, what does the term 'Cash' encompass in the cash flow statement?

Cash in hand and demand deposits with banks

The correct answer is option 4- Cash in hand and demand deposits with banks.

According to AS-3, the term 'Cash' in the cash flow statement encompass Cash in hand and demand deposits with banks.

The cash flow statement shows inflows and outflows of cash and cash equivalents from various activities of an enterprise during a particular period. 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.