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CA Intermediate · Advanced Accounting · AS 3 Cash Flow Statement

Himalaya Ltd. purchased machinery costing Rs 3,00,000 by issuing equity shares of the same value to the supplier, with no cash paid. In the context of AS 3, how should this transaction be treated in the cash flow statement?

The purchase of machinery against issue of shares is a non-cash transaction, so AS 3 excludes it from the cash flow statement. It must still be disclosed elsewhere in the financial statements, since it affects investing and financing activities without moving cash or cash equivalents.

  1. AShown as an investing outflow and a financing inflow of Rs 3,00,000
  2. BShown only as an investing outflow of Rs 3,00,000
  3. CExcluded from the cash flow statement but disclosed elsewhere in the financial statementsCorrect
  4. DShown as an operating outflow of Rs 3,00,000

Explanation

AS 3 excludes non-cash transactions from the cash flow statement because they do not involve cash or cash equivalents. They must be disclosed elsewhere in the financial statements so users get relevant information on investing and financing activities.

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