Which of the following is a 'Cash Equivalent'? MCQ with Answer and Explanation

Which of the following is a 'Cash Equivalent'?
A. Bank deposits with maturity more than 12 months
B. Debtors
C. Short-term, highly liquid investments with maturity 3 months or less
D. Inventory
Answer: Option C
Solution (By JKSSB Mock Tests)
Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and subject to insignificant risk of changes in value.

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Practice More Accountancy and Book Keeping Questions

Question #1
Interest on partners' capital is:
A. Always 6%
B. A charge against profit
C. Not allowed
D. An appropriation of profit

Correct Answer: Option D


Explanation:
Interest on capital, when deed provides, is an appropriation of profit, not a charge.

Question #2
A change in depreciation method is treated as:
A. Extraordinary item
B. Prior period item
C. Error
D. Change in accounting policy

Correct Answer: Option D


Explanation:
Change in depreciation method is a change in accounting policy, requiring retrospective application as per AS 5.

Question #3
S1: A Receipt Voucher is prepared for cash receipts. S2: A Payment Voucher is prepared for cash payments. Which statement(s) is/are correct?
A. S1 only
B. S2 only
C. Neither S1 nor S2
D. Both S1 and S2

Correct Answer: Option D


Explanation:
In the voucher entry system, a Receipt Voucher is used to record all cash and bank receipts. A Payment Voucher is used to record all cash and bank payments. Both statements are correct.