Which of the following is an in flow of cash in financing activity?

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → Issue of shares to public

A cash flow statement shows only transactions that bring in or pay out cash. Shares issued to the public are paid for in cash, so the proceeds are a cash inflow from financing activities. Financing transactions that do not involve cash are left out of the statement.

Option (1) Issue of Bonus shares — Incorrect. Bonus shares are issued out of reserves, free of cost to the shareholders; no cash comes in.

Option (2) Shares issued for consideration other than cash — Incorrect. Shares issued to a vendor for assets are a non-cash transaction and are kept out of the cash flow statement.

Option (3) Issue of shares to promoters — Incorrect. Shares allotted to promoters are usually given for their services in forming the company (consideration other than cash), so no cash comes in.

Option (4) Issue of shares to public — Correct. The public pays the application, allotment and call money in cash.

NCERT (2026-27 edition):
Non-cash Transactions – “As per AS-3, investing and financing transactions that do not require the use of cash or cash equivalents should be excluded from a cash flow statement. Examples of such transactions are – acquisition of machinery by issue of equity shares or redemption of debentures by issue of equity shares. Such transactions should be disclosed elsewhere in the financial statements in a way that provide all the relevant information about these investing and financing activities. Hence, assets acquired by issue of shares are not disclosed in cash flow statement due to non-cash nature of the transaction.”

NCERT (2026-27 edition):
Classification of Activities for the Preparation of Cash Flow Statement