Accountancy Part BCash Flow Statement

From the following information, cash flow from financing activities w…

From the following information, cash flow from financing activities will be:

Issue of share capital Rs. 4,00,000

Repayment of bank loan Rs. 1,00,000

Payment of interest on bank loan Rs. 10,000

Payment of dividend Rs. 1,50,000

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → Cash flows from Financing Activities Rs. 1,40,000

Financing activities change the size of the owners’ capital and the borrowings of the enterprise. The interest paid on the bank loan and the dividend paid are payments to those who provide the firm’s funds, so they are financing outflows as well.

Issue of share capital: + Rs. 4,00,000
Repayment of bank loan: − Rs. 1,00,000
Interest paid on bank loan: − Rs. 10,000
Dividend paid: − Rs. 1,50,000
Net cash flow from financing activities = Rs. 4,00,000 − Rs. 2,60,000 = Rs. 1,40,000

Leaving out the interest gives Rs. 1,50,000; leaving out the dividend gives Rs. 2,90,000. Both are financing outflows and both are deducted.

NCERT (2026-27 edition):
Cash from Financing Activities – “As the name suggests, 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.”

NCERT (2026-27 edition):
Interest and Dividend – “… In case of a non-financial enterprise, as per AS-3, it is considered more appropriate that payment of interest and dividends are classified as financing activities whereas receipt of interest and dividends are classified as investing activities.”