Accountancy Part BCash Flow Statement

Which of the following is excluded in Cash Flow Statement?

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → Acquisition of machinery by issue of equity shares

A Cash Flow Statement shows only flows of cash and cash equivalents. Buying machinery by issuing shares involves no cash, so as a non-cash transaction it is excluded (it is disclosed elsewhere in the financial statements).

Option (2) Shares issued at a premium — Incorrect. Cash is received for the shares and the premium, a financing inflow.

Option (3) Debentures issued at a discount — Incorrect. The net cash received is a financing inflow.

Option (4) Sale of machinery against bank draft — Incorrect. A bank draft is as good as cash, so this is an investing inflow.

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.”