Identify the items NOT be shown under Investing Activities while making Cash Flow statement.
(a) Proposed Dividend
(b) Purchase of non-current Investments
(c) Interest paid on long term borrowings
(d) Sale of machinery
(e) Marketable securities
Choose the most appropriate answer from the options given below :
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (a), (c), (e) only
Investing activities are the buying and selling of long-term assets, such as fixed assets and non-current investments. Items (a), (c) and (e) are not of this kind.
(a) Proposed Dividend — Not an investing activity. A dividend that is only proposed involves no cash flow yet. When it is paid in a later year, the payment is a financing activity.
(b) Purchase of non-current Investments — An investing activity. Buying long-term investments is a cash outflow from investing activities.
(c) Interest paid on long term borrowings — Not an investing activity. Interest is the cost of borrowed long-term funds, so it is a financing activity.
(d) Sale of machinery — An investing activity. Machinery is a fixed asset, and cash from its sale is a cash inflow from investing activities.
(e) Marketable securities — Not an investing activity. Short-term marketable securities are cash equivalents. Moving cash into them is part of managing cash, so it is not shown as a cash flow at all.
NCERT (2026-27 edition):
Proposed Dividend – “… Briefly, proposed dividend of previous year after declaration (approved) by the shareholders will be debited to surplus i.e., Balance in Statement of Profit and Loss. While preparing cash flow statement, previous year's proposed dividend will be added to Act Profit under operating activities and will be shown under financial activity.” 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.” |
