Which of the following transactions are shown under Financing activity:
(A) Purchase of Furniture by issuing 1000 Shares @10 each
(B) Interest paid ₹ 25,000
(C) Dividend Paid ₹ 10,000
(D) Issue of 5000 Bonus shares @ 10 each
Choose the correct answer from the options given below:
Which of the following transactions are shown under Financing activity:
(A) Purchase of Furniture by issuing 1000 Shares @10 each
(B) Interest paid ₹ 25,000
(C) Dividend Paid ₹ 10,000
(D) Issue of 5000 Bonus shares @ 10 each
Choose the correct answer from the options given below:
Solution
Financing Activities include transactions that result in changes in the size and composition of equity capital and borrowings of the enterprise. However, only cash transactions are recorded in the Cash Flow Statement.
Let's analyze each transaction:
(A) Purchase of Furniture by issuing 1000 Shares @10 each
This is a non-cash transaction where furniture (an asset) is acquired by issuing shares. Since no actual cash flow occurs, this transaction is not shown in the Cash Flow Statement. It is only disclosed in Notes to Accounts as a significant non-cash transaction.
(B) Interest paid ₹ 25,000
Interest paid involves actual cash outflow and is classified under Financing Activities as per AS-3. This is shown under Financing Activity.
(C) Dividend Paid ₹ 10,000
Dividend paid involves actual cash outflow to shareholders and is classified under Financing Activities. This is shown under Financing Activity.
(D) Issue of 5000 Bonus shares @ 10 each
Bonus shares are issued by capitalizing reserves without receiving any cash consideration. Since this is a non-cash transaction, it is not shown in the Cash Flow Statement. It is only disclosed in Notes to Accounts.
Only transactions (B) and (C) involve actual cash flows and are shown under Financing Activities. Transactions (A) and (D) are non-cash transactions and are excluded from the Cash Flow Statement.
Correct Answer: Option 2
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2022: 20 July Shift 1