Cash and cash equivalents and bank balances other than cash and cash equivalents as per Division II – Ind AS Schedule III to the Companies Act 2013

(i) Cash and cash equivalents shall be classified as:

(a) Balances with banks (of the nature of cash and cash equivalents);

(b) Cheques, drafts on hand;

(c) Cash on hand;           

Tips from CA Solutions Global

Cash is defined as cash and demand deposits with banks.

Cash equivalents defined as short term, highly liquid investment that are readily convertible into known amounts of cash and which are subject to an insignificant risk of change in value.

Here investment (deposit) having short term maturity say 3 months from the date of original date of acquisition.

In simple terms, here investment (deposit) considered as cash equivalents only when original   maturity is three months or less

Any bank Balances and demand deposits held as margin money or security against any borrowings don’t meet the definition of cash equivalents

(ii) Bank balances other than cash and cash equivalents as above, shall be disclosed below cash and cash equivalents on the face of the Balance Sheet

Further, note 6(C) of General Instructions for Preparation of Balance Sheet requires the following disclosures with regard to cash and bank balances:

(a) Earmarked balances with banks (for e.g., for unpaid dividend) shall be separately stated;

(b) Balances with banks to the extent held as margin money or security against the borrowings, guarantees, other commitments shall be disclosed separately;

(c) Repatriation restrictions, if any, in respect of cash and bank balances shall be separately stated.

Tips from CA Solutions Global

Balances with banks held as margin money or security against borrowings, guarantees, etc are included in bank balances other than cash and cash equivalents. And;

Bank deposits with original maturity of more than three months but less than 12 months

General

Ind AS 7 permits bank overdraft to be included in cash equivalents, but for the purpose of preparing financial statement unless the offset conditions as given in paragraph 42 of Ind AS 32 are complied with. Bank overdraft, in the balance sheet, should be included as ‘borrowings’ under Financial Liabilities

Priyansh Minocha

Priyansh Minocha is C.E.O and Director at Amonest India Private Limited and Founder at Casolutionsglobal

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