Which transaction among the following is NOT disclosed in the cash fl…

Which transaction among the following is NOT disclosed in the cash flow statement due to the non-cash nature of the transaction?

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → Assets acquired by issue of shares

A cash flow statement shows only movements of cash and cash equivalents. An investing or financing transaction that involves no cash at all is a non-cash transaction and is left out of the statement. Buying an asset and paying the seller in the company’s own shares is such a transaction: the asset comes in and the share capital goes up, but no cash moves.

Option (1) Disposal of Equipment and non-current investments — Shown in the cash flow statement. The sale proceeds are received in cash, so they are a cash inflow from investing activities.

Option (3) Redemption of preference shares — Shown in the cash flow statement. The company pays cash to the preference shareholders, a cash outflow from financing activities.

Option (4) Sale of property — Shown in the cash flow statement. Property is a fixed asset; cash received on its sale is a cash inflow from investing activities.

NCERT (2026-27 edition):
Non-cash Transactions – “… As per AS-3, investing and financing transactions that do not require the use of cash or cash equivalents should be excluded from a cash flow statement. Examples of such transactions are – acquisition of machinery by issue of equity shares or redemption of debentures by issue of equity shares. Such transactions should be disclosed elsewhere in the financial statements in a way that provide all the relevant information about these investing and financing activities. Hence, assets acquired by issue of shares are not disclosed in cash flow statement due to non-cash nature of the transaction.”