Explain Cash & Equivalents in IAS7 Standard

Explain the following items which are defined in international standard IAS7

1. Cash
2. Cash equivalents
3. Operating activities
4. Investing activities
5. Financing activities

1. Cash comprises cash on hand and demand deposits. Bank overdrafts are also included. This means that the total cash figure could be negative.

2.Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value. Cash equivalents are regarded by IAS7 as being virtually indistinguishable from cash itself and are treated as rather than as investments.

3.Operating activities are principal revenue-producing activities of the entity (e.g. the sale of goods and services).

4.Investing activities comprise the acquisition and disposal of long-term assets and other investments. the acquisition and disposal of property, plant and equipment are included under this heading.

5.Financing activities are activities that result in changes in the size and composition of the contributed equity and borrowings of the entity. This heading includes share issues, share redemption, borrowings and repayments of borrowings.<