## Cash and Cash Equivalents (CCE) – AS 3

### Definition

CCE includes items that are immediately liquid and carry negligible risk of change in value.

### Components of CCE

1. Cash in Hand — physical currency held by the entity.

2. Demand Deposits with Bank — Savings A/c, Current A/c (withdrawable on demand).

3. Fixed Deposits with maturity ≤ 3 months — Short-term FDs qualify; money must be receivable within 3 months from the date of deposit.

4. Highly liquid short-term investments — subject to an insignificant risk of change in value (e.g., Treasury Bills, commercial paper with ≤ 3 months maturity).

### What is NOT CCE

Item	Reason excluded
Equity shares	Significant risk of price fluctuation — never qualifies as CCE.
FD with maturity > 3 months	Not sufficiently liquid.
Investments in debentures (long-term)	Not highly liquid.

### Key Rule

The 3-month limit is counted from the date of acquisition/deposit, not from the balance sheet date.

Worked example

### Example 1

Determine whether each item qualifies as CCE:

Cash in hand ₹5,000 → CCE ✓
SB Account balance ₹20,000 → CCE ✓ (demand deposit)
FD of ₹10,000 maturing in 60 days from deposit date → CCE ✓ (≤ 3 months)
FD of ₹10,000 maturing in 6 months → NOT CCE ✗
Equity shares purchased ₹15,000 → NOT CCE ✗ (significant price risk)

⚠️ Common exam mistakes

Treating equity shares as CCE — they are explicitly excluded due to significant risk of value change.
Counting FD maturity from balance sheet date instead of from the date of deposit/acquisition.
Including long-term debentures as CCE — only highly liquid instruments with insignificant value-change risk qualify.

Bare-Act text Para 7 · AS 3 – Cash Flow Statements · click to expand

Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

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Cash and Cash Equivalents (CCE) – Definition and Components

Worked example

⚠️ Common exam mistakes