08 October 2013
In my opinion , the Bank Overdraft shall form part of Cash and Cash Equivalents . However , the Cash Credit availed from bank shall form part of Financing Activity. Many a times , people confuse with Bank OD and Cash Credit and consider the same on equal footings
08 October 2013
As per AS -3 , Cash equivalents include demand deposits with banks . Demand deposit necessarily means the deposits which can be demanded later on . Bank overdraft( Negaative balance in A /c . ) is not a deposit . Further, Under GAAP , changes in overdraft balances - sources of cash from increasing overdraft balances or uses of cash forreducing them - should be reported as financing activities on the statement of cash flows . Also , in balance sheet we prefer different treatment to bank deposits & bank overdrafts . Any balance with bank is shown under the head " Cash & Bank Balance " while Bank O /d is always shown as a current liability. And as per Financial Accounting Standard No. 95 ( Statement of Cash Flows ) , cash balances on the cash flow statement should relate to the amounts reported on the balance sheet.
CAclubindia
