Ascites is defined as collection of excessive fluid in peritoneal cavity; normally there is little fluid between visceral and parietal layers of peritoneum. It becomes clinically detectable when 500 ml fluid has accumulated. Ascites is a common clinical condition and its differential diagnosis remains a problem in clinical practice. The earlier approach in differential diagnosis constituted, separation of fluids on the basis of protein concentration in ascitic fluid i.e. transudate and exudate concept. Fluid was called transudate if protein levels are < 2.5 gm /dl and exudate if above that . Transudative ascites supposed to be caused by liver diseases while neoplastic disorders, inflammatory disorders, tuberculosis and other inflammatory diseases cause exudative ascites. However this concept has certain limitations due to which other better discriminators were evolved i.e. serum ascitic albumin gradient (SAAG) and ascitic fluid cholesterol for immediate etiological diagnosis of ascites.