Read the following information to answer.
On the basis of case study given below, answer the question which follows:
"Mikku on alumni of IIT Delhi initiated his start-up "Gajanan Lid.," in the year 2016. His profit in the year 2020-21 after all appropriation was ₹6,25,000. This profit was arrived after taking the following items into consideration:
| Loss on Sale of fixed Assets | ₹5,00,000 |
| Goodwill written off | ₹3,80,000 |
| Transfer to reserve | ₹3,55,000 |
| Provision for tax | ₹2,70,000 |
| Interest on Debentures paid | ₹1,65,000 |
| Particulars | 2020(₹) | 2021(₹) |
| Prepaid Expenses | 25,000 | 10,000 |
| Accrued interest | 40,000 | 68,000 |
| Trade payables | 7,00,000 | 4,00,000 |
| Inventories | 6,50,000 | 5,50,000 |
From among the following, choose the item which would be mentioned in financing activity also:
Answer & explanation
Correct answer: option 2
The correct answer is option 2- Interest on Debenture.
Interest on Debenture would be mentioned in financing activity also.
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.