Match the following- LIST 1 LIST 2 (A) The Accounting basis for Cash…

Match the following-

LIST 1	LIST 2
(A) The Accounting basis for Cash Flow Statement is	(I) Investment in shares
(B) Dividend paid on Equity and Preference capital comes under	(II) Cash Basis
(C) It can not be considered as cash and cash equivalents	(III) Treasury bills
(D) It can be classified as cash and cash equivalents	(IV) Cash outflow from Financing Activities

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → (A)-(II), (B)-(IV), (C)-(I), (D)-(III)

Each item belongs to a basic idea of the cash flow statement:

(A) The Accounting basis for Cash Flow Statement is — this matches (II) Cash Basis. It records actual inflows and outflows of cash.

(B) Dividend paid on Equity and Preference capital comes under — this matches (IV) Cash outflow from Financing Activities. Dividends are a return to the providers of capital.

(C) It can not be considered as cash and cash equivalents — this matches (I) Investment in shares. Share prices change, so such investments are excluded.

(D) It can be classified as cash and cash equivalents — this matches (III) Treasury bills. They are short-term, highly liquid and almost risk-free.

NCERT (2026-27 edition):
Objectives of Cash Flow Statement – “A Cash flow statement shows inflow and outflow of cash and cash equivalents from various activities of a company during a specific period.”

NCERT (2026-27 edition):
Cash from Financing Activities

Extract from the NCERT textbook

NCERT (2026-27 edition):
Cash and Cash Equivalents – “… As per AS-3, ‘Cash’ comprises cash in hand and demand deposits with banks, and ‘Cash equivalents’ means short-term highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. An investment normally qualifies as cash equivalents only when it has a short maturity, of say, three months or less from the date of acquisition. Investments in shares are excluded from cash equivalents unless they are in substantial cash equivalents.”