Identify the items not to be shown under Financing activities while m…

Identify the items not to be shown under Financing activities while making cash flow:-

A. Payment of dividend and interest

B. Interest paid by financial enterprise

C. Redemption of debentures

D. Proceeds from issue of equity shares

E. Loss due to theft

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → B and E only

Financing activities are those that change the size and make-up of the owners' capital and borrowings of the enterprise.

A. Payment of dividend and interest A financing activity. For a non-financial enterprise, payment of dividend and interest is a financing outflow.
B. Interest paid by financial enterprise Correct. Not a financing activity. For a financial enterprise, whose main business is lending and borrowing, interest paid is an operating activity.
C. Redemption of debentures A financing activity. It repays long-term borrowings.
D. Proceeds from issue of equity shares A financing activity. It raises owners' capital.
E. Loss due to theft Correct. Not a financing activity. Theft is an extraordinary item; its cash effect is shown separately under the activity it arises from, here operating, not under financing.

NCERT (2026-27 edition):
Classification of Activities for the Preparation of Cash Flow Statement

Extract from the NCERT textbook

NCERT (2026-27 edition):
Interest and Dividend – “In case of a financial enterprise (whose main business is lending and borrowing), interest paid, interest received and dividend received are classified as operating activities while dividend paid is a financing activity.”

NCERT (2026-27 edition):
Extraordinary items – “Extraordinary items are not the regular phenomenon, e.g., loss due to theft or earthquake or flood. Extraordinary items are non-recurring in nature and hence cash flows associated with extraordinary items should be classified and disclosed separately as arising from operating, investing or financing activities. This is done to enable users to understand their nature and effect on the present and future cash flows of an enterprise.”