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IAI Actuarial Core Principles · Business Finance · Construction and features of company accounts and reports

Under Indian accounting standard on cash flow statements, which one of the following is normally classified as a financing activity?

Proceeds from issuing debentures are a financing activity because they alter the company's borrowings. Sale of plant and purchase of long-term investments are investing activities, while payments to suppliers and tax on operating profits fall under operating activities.

  1. AProceeds from sale of plant and machinery
  2. BCash paid to suppliers of raw materials
  3. CProceeds from issue of debenturesCorrect
  4. DPurchase of shares in another company held as long-term investment
  5. Income tax paid on operating profits

Explanation

Financing activities change the size and composition of owners' capital and borrowings, so debenture issue proceeds belong there. Plant sale and long-term investment purchase are investing flows. Supplier payments and tax on operating profits are operating flows.

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