Match List I with List II
| LIST I | LIST II | ||
|---|---|---|---|
| A. | Decrease in Goodwill Account | I. | Operating Activities |
| B. | Dividend Paid | II. | Financing Activity |
| C. | Rent Received | III. | Non-cash expenses |
| D. | Purchase of Machine for trading purpose | IV. | Investing Activities |
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → A-III, B-II, C-IV, D-I
Under AS-3 every cash flow is classified as operating, investing or financing; items with no cash movement are adjusted as non-cash items.
(A) Decrease in Goodwill Account — this matches (III) Non-cash expenses. The decrease is goodwill written off, a charge against profit with no cash paid, so it is added back to the net profit.
(B) Dividend Paid — this matches (II) Financing Activity. Dividend is a return to the providers of capital, a financing outflow.
(C) Rent Received — this matches (IV) Investing Activities. For a non-rental business, rent is income from property held as an investment, so it is an investing inflow.
(D) Purchase of Machine for trading purpose — this matches (I) Operating Activities. A machine bought for resale is held as inventory, so its purchase is an operating outflow, not the purchase of a fixed asset.
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