Match List – I with List – II. List - I List - II (A) Proceeds from L… | Accountancy Part B CUET question

Match List – I with List – II.

List - I	List - II
(A) Proceeds from Long term borrowings	(I) Investing Activities
(B) Purchase of Raw Materials	(II) Operating Activities
(C) Purchase of New Equipment	(III) Cash and Cash Equivalent
(D) Marketable Securities	(IV) Financing Activities

Choose the correct answer from the options given below :

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → (A)-(IV), (B)-(II), (C)-(I), (D)-(III)

Each item is placed by the activity it belongs to:

(A) Proceeds from Long term borrowings — this matches (IV) Financing Activities. Raising long-term loans changes the borrowings of the enterprise.

(B) Purchase of Raw Materials — this matches (II) Operating Activities. Buying raw material is part of the main revenue-producing activity.

(C) Purchase of New Equipment — this matches (I) Investing Activities. Equipment is a long-term (fixed) asset.

(D) Marketable Securities — this matches (III) Cash and Cash Equivalent. Short-term marketable securities are part of cash equivalents, so buying them is not a cash flow at all.

NCERT (2026-27 edition):
Cash from Financing Activities – “As the name suggests, financing activities relate to long-term funds or capital of an enterprise, e.g., cash proceeds from issue of equity shares, debentures, raising long-term bank loans, repayment of bank loan, etc.”

NCERT (2026-27 edition):
Cash from Operating Activities – “Operating activities are the activities that constitute the primary or main activities of an enterprise. For example, for a company manufacturing garments, operating activities are procurement of raw material, incurrence of manufacturing expenses, sale of garments, etc.”

NCERT (2026-27 edition):
Cash from Investing Activities – “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.”

NCERT (2026-27 edition):
Cash Flows – “… Cash management includes the investment of excess cash in cash equivalents. Hence, purchase of marketable securities or short-term investment which constitutes cash equivalents is not considered while preparing cash flow statement.”