CS Executive · Corporate Accounting and Financial Management · Cash Flows
Which of the following is a financing activity for a company under AS 3, whose definition refers to changes in owners' capital (including preference share capital) and borrowings?
Redemption of preference shares for cash is a financing activity, because AS 3 defines financing activities as those changing owners' capital, including preference share capital, and borrowings. The other items relate to investing or operating activities.
- ARedemption of preference shares for cashCorrect
- BPurchase of machinery for cash
- CReceipt of sale proceeds of old furniture
- DCollection from trade receivables
Explanation
Financing activities change the size and composition of owners' capital (including preference share capital) and borrowings. Redeeming preference shares reduces preference capital, so it is financing. Machinery purchase and furniture sale are investing; receivables collection is operating.
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