Match List – I with List – II.

Choose the correct answer from the options given below.

(A)-(II), (B)-(I), (C)-(IV), (D)-(III)

The correct answer is option 4- (A)-(II), (B)-(I), (C)-(IV), (D)-(III).

(A) Cash from Operating Activities- (II) Cash receipts from sale of goods and the rendering of services.

Cash flows from operating activities primarily stem from the core operations of the business. They mainly arise from transactions and events that contribute to the determination of net profit or loss. Examples of cash flows from operating activities encompass:
Cash Inflows from Operating Activities: 

• Cash received from the sale of products and provision of services.
• Cash received from royalties, fees, commissions, and other sources of income.

Cash Outflows from Operating Activities:

• Cash disbursed to suppliers for acquiring goods and availing services.
• Cash disbursed to employees and on their behalf.
• Cash payments to an insurance company for premiums, claims, annuities, and related policy benefits.
• Cash payments for income taxes, unless these payments can be specifically attributed to financing or investing activities.

(B) Cash from Financing Activities-  (I) Dividends paid on equity and preference capital.
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.

(C) Cash from Investing Activities- (IV) Cash receipt from disposal of fixed assets including intangibles. 
As per AS-3, 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.

(D) Cash and cash equivalents- (III) Bank balance.
According to Accounting Standard 3 (AS-3), 'Cash' encompasses physical cash on hand and demand deposits held in banks. 'Cash equivalents' refer to short-term, highly liquid investments that can be quickly converted into known amounts of cash with minimal risk of value fluctuations. Typically, an investment qualifies as a cash equivalent when it has a short maturity period, often three months or less from the acquisition date. Investments in stocks are not considered cash equivalents, unless they meet specific criteria. For instance, preference shares that are acquired shortly before their scheduled redemption date, provided there's minimal risk of the company failing to repay the amount upon maturity, can be treated as cash equivalents. Similarly, short-term marketable securities that can be readily converted into cash without significant changes in their value are also considered cash equivalents. These investments must be highly liquid and easily convertible into cash.