Identify the Investing Activity for a trading organisation.

Purchase of shares from other companies

The correct answer is Option (3) - Purchase of shares from other companies.

Purchase of shares from other companies is an investing activity of a trading organisation. Money is invested in other company to earn profits. When a trading organization invests in shares of other companies, it is acquiring ownership in those companies for the purpose of earning dividends and capital appreciation.

As per AS-3, investing activities are the acquisition and disposal of long-term assets and other investments not included in cash equivalents. Investing activities relate to purchase and sale of long-term assets or fixed assets such as machinery, furniture, land and building, etc. Transactions related to long term investment are also investing activities. Separate disclosure of cash flows from investing activities is important because they represent the extent to which expenditures have been made for resources intended to generate future income and cash flows.

OTHER OPTIONS

* Purchase of goods is an operating activity.
* Rent paid is an operating activity.
* Issue of Shares is a financing activity.