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CA Intermediate · Advanced Accounting · AS 3 Cash Flow Statement

Under AS 3, which of the following items should be classified as a cash flow from financing activities by a non-financial company?

Cash proceeds from issue of debentures are a financing activity under AS 3, because they change the company's borrowings. Sales receipts are operating, and buying shares of another company or selling plant are investing activities.

  1. ACash receipts from sale of goods
  2. BCash payment to acquire shares of another company
  3. CCash proceeds from issue of debenturesCorrect
  4. DCash received on sale of plant

Explanation

Financing activities change the size and composition of owners' capital and borrowings. Proceeds from issuing debentures fall here. Sales receipts are operating, while share acquisition and plant sale are investing.

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