Accountancy Part BCash Flow Statement

Royan Ltd. issued ₹1,00,000, 9% debentures of ₹100 each to public. Is…

Royan Ltd. issued ₹1,00,000, 9% debentures of ₹100 each to public. Issue was subscribed. The amount will be shown as:

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → Financing Activity

Issuing debentures raises long-term borrowed funds. Cash proceeds from issuing shares, debentures and long-term loans change the size and make-up of the company’s capital and borrowings, so they are financing activities.

Option (1) Operating Activity — Incorrect. Raising a loan is not part of the main revenue-producing activity.

Option (2) Investing Activity — Incorrect. Investing covers buying and selling long-term assets and investments, not raising funds.

Option (4) Cash and Cash equivalent — Incorrect. Debentures issued are a liability of the company, not a short-term liquid investment.

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. 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.”