1.68     Query

Disclosure of Fixed Deposits received as Security.

Call and fixed deposits received by us towards security are being shown under ‘Loans & Advances’ with contra entry under ‘Current Liabilities’ in the balance sheet.

 A question has been raised that as the fixed deposit receipts are in the name of the corporation, the same should be shown in ‘Cash and Bank Balances’ under ‘Current Assets’.

 Our own point of view is that fixed deposits received can be encashed when the contractor or supplier has defaulted in terms of the agreement and these are not therefore, available for use by the corporation and therefore it is not correct to include these in ‘cash and bank balances’.

Committee’s views are solicited.

                                                                     Opinion                                            April  30, 1981

 The Committee is of the opinion that the holding of security deposit from the contractor and supplier in the form of a fixed deposit receipt not being an income or receipt or asset of the corporation, should be disclosed by way of a suitable note in the balance sheet and there is no need to include it as a contra item in the balance sheet.

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