CA Intermediate · Advanced Accounting · AS 3 Cash Flow Statement
Rao Ltd's cash flow statement is being prepared. Which of the following items would be classified as a financing activity under AS 3?
Cash proceeds from issue of debentures are a financing activity, because they alter the borrowings of the enterprise. Share purchases as investments and interest received by a non-financial company are investing, and cash from sale of goods is an operating activity.
- ACash proceeds from issue of debenturesCorrect
- BCash paid to acquire shares of another company as investment
- CCash received as interest on loans given by a non-financial company
- DCash received from sale of goods
Explanation
Financing activities change the size and composition of owners' capital and borrowings. Debenture issue proceeds are borrowings, hence financing. Purchase of shares as investment and interest received by a non-financial company are investing; sale of goods is operating.
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