The correct answer is Option (2) - A-III, B-IV, C-I, D-II.
* Operating Activities - Employees benefits expenses.
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. These are the principal revenue generating activities (or the main activities) of the enterprise and these activities are not investing or financing activities. Employee benefits expenses is cash outflow.
* Investing Activities- Proceeds from sale of patents.
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. Sale of patents is disposal of intangible long term asset.
* Financing Activities- Proceeds from issuance of Equity.
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. As per AS-3, financing activities are activities that result in changes in the size and composition of the owners’ capital (including preference share capital in case of a company) and borrowings of the enterprise. Separate disclosure of cash flows arising from financing activities is important because it is useful in predicting claims on future cash flows by providers of funds (both capital and borrowings) to the enterprise.
* Cash and Cash equivalents- Short term Investment.
Within the realm of cash management, surplus cash is typically invested in cash equivalents. Consequently, the acquisition of marketable securities or short-term investments, which qualify as cash equivalents, is not factored into the preparation of the cash flow statement. |
