Accountancy Part BCash Flow Statement

Which of the following transactions are shown under Financing activit…

Which of the following transactions are shown under Financing activity?

(A) Purchase of Furniture by issuing 1000 Shares @10 each

(B) Interest paid 25,000

(D) Issue of 5000 Bonus shares @ 10 each

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → (B) and (C) only

Financing activities are the cash flows with the owners and lenders of the business. A transaction that involves no cash at all is left out of the cash flow statement.

(A) Purchase of Furniture by issuing 1000 Shares @10 each — not shown: the furniture is paid for in shares, so no cash moves. It is a non-cash transaction.
(B) Interest paid 25,000 — a financing activity: for a non-financial enterprise, interest paid is a cost of borrowed funds.
(C) Dividend Paid 10,000 — a financing activity: it is a return paid to the owners.
(D) Issue of 5000 Bonus shares @ 10 each — not shown: bonus shares are issued out of reserves, free of cost, so no cash comes in or goes out.

NCERT (2026-27 edition):
Interest and Dividends – “… In case of a non-financial enterprise, as per AS-3, it is considered more appropriate that payment of interest and dividends are classified as financing activities whereas receipt of interest and dividends are classified as investing activities.”

NCERT (2026-27 edition):
Treatment of Some Peculiar Items – “… 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.”