Match List – I with List – II.

Choose the correct answer from the options given below.

(A)-(I), (B)-(III), (C)-(II), (D)-(IV)

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

(A) Cash Outflows from financing activities- (I) Redemption of debentures.
Financing activities relate to long-term funds or capital of an enterprise, e.g., cash proceeds from issue of equity shares, debentures, raising long-term bank loans, repayment of bank loan, etc. As per AS-3, financing activities are activities that result in changes in the size and composition of the owners’ capital (including preference share capital in case of a company) and borrowings of the enterprise. Separate disclosure of cash flows arising from financing activities is important because it is useful in predicting claims on future cash flows by providers of funds (both capital and borrowings) to the enterprise.

(B) Cash Inflows from operating activities- (III) Cash from royalties, fees, commissions and other revenues.

Cash flows from operating activities primarily stem from the core operations of the business. They mainly arise from transactions and events that contribute to the determination of net profit or loss. Cash Inflows from Operating Activities: 

• Cash received from the sale of products and provision of services.
• Cash received from royalties, fees, commissions, and other sources of income.

(C) Cash and cash equivalents- (II) Current Investment.
Current investments are part of cash and cash equivalents, as they are short-term, highly liquid investments that can be quickly converted to cash. According to Accounting Standard 3 (AS-3), 'Cash' encompasses physical cash on hand and demand deposits held in banks. 'Cash equivalents' refer to short-term, highly liquid investments that can be quickly converted into known amounts of cash with minimal risk of value fluctuations.

(D) Cash Inflows from investing activities- (IV) Cash receipt from disposal of fixed assets including intangibles.
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.