Match List – I with List – II. List - I List - II (A) Purchase of Bui… | Accountancy Part B CUET question

Match List – I with List – II.

List - I	List - II
(A) Purchase of Building	(I) Financing activity
(B) Change in inventory	(II) Cash and cash equivalents
(C) Cash in hand	(III) Investing activity
(D) Dividend paid	(IV) Operating activity

Choose the correct answer from the options given below :

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → (A)-(III), (B)-(IV), (C)-(II), (D)-(I)

AS-3 sorts every cash flow into operating, investing or financing activities, apart from the cash and cash equivalents themselves.

(A) Purchase of Building — this matches (III) Investing activity. A building is a long-term asset.

(B) Change in inventory — this matches (IV) Operating activity. Inventory is a working-capital item; its change adjusts operating profit.

(C) Cash in hand — this matches (II) Cash and cash equivalents. Cash comprises cash in hand and demand deposits with banks.

(D) Dividend paid — this matches (I) Financing activity. Dividend is a return paid to the providers of share capital.

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

Extract from the NCERT textbook

NCERT (2026-27 edition):
Cash and Cash Equivalents – “… As per AS-3, ‘Cash’ comprises cash in hand and demand deposits with banks, and ‘Cash equivalents’ means short-term highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.”

NCERT (2026-27 edition):
Ascertaining Cash Flow from Operating Activities – “… Other important adjustments relate to changes in working capital which are necessary (i.e., items of current assets and current liabilities) to convert net profit/loss which is based on accrual basis into cash flows from operating activities. Therefore, the increase in current assets and decrease in current liabilities are deducted from the operating profit, and the decrease in current assets and increase in current liabilities are added to the operating profit so as to arrive at the exact amount of net cash flow from operating activities.”