bafs fixed deposit question!

- Cash and Cash Equivalents are resources and are reported as Assets.

- In this case, the Fixed Deposit $600,000 (3 months) should be reported
on the Balance Sheet as at March 31, 2012.
It is considered as an Cash Equivalent item, should be shown on the
Balance Sheet, grouped under Current Assets.

- Therefore, Current Assets $600,000 should NOT be reported on
Income Statement.

- Cash Equivalents: are low risk investments that can be converted into
cash within 90 days or less.
e.g. Short Term Deposit (30 days, 60 days, 90 days), Treasury Bills.
Companies invest in cash equivalents in order to earn higher interest
than can be earned in bank savings or chequing accounts.

WK

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