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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. |
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Answer» 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. |
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