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

(C) Dividend Paid 10,000

(D) Issue of 5000 Bonus shares @ 10 each

Choose the correct answer from the options given below:

(B) and (C) only

The correct answer is option 2- (B) and (C) only.

(A) Purchase of Furniture by issuing 1000 Shares @10 each- NON CASH TRANSACTION as shares are issued for furniture.

(B) Interest paid 25,000- FINANCING ACTIVITY  of cash outflow

(C) Dividend Paid 10,000- FINANCING ACTIVITY  of cash outflow

(D) Issue of 5000 Bonus shares @ 10 each- NON CASH TRANSACTION as bonus shares are issued free of cost.

Financing activities relate to long-term funds or capital of an enterprise. 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. Examples of financing activities are:

Cash Inflows from financing activities:

• Cash proceeds from issuing shares (equity or/and preference).
• Cash proceeds from issuing debentures, loans, bonds and other short/ long-term borrowings.

Cash Outflows from financing activities:

• Cash repayments of amounts borrowed.
• Interest paid on debentures and long-term loans and advance.
• Dividends paid on equity and preference capital.