Which of the following is not an investing activity in the cash flow statement of a company?

Purchase of marketable securities for ₹50,000 cash

The correct answer is option 1- Purchase of marketable securities for ₹50,000 cash.

* Purchase of marketable securities for ₹50000 cash- It is included in cash and cash equivalents not investing activity. 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. An investment normally qualifies as cash equivalents only when it has a short maturity, of say, three months or less from the date of acquisition. Investments in shares are excluded from cash equivalents unless they are in substantial cash equivalents.

* All other options include purchase or sale of long term assets which constitute the part of investing activity. 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.