Under Cash Flow Statement, Match the LIST-I with LIST-II.LIST-ILIST-I…

Under Cash Flow Statement, Match the LIST-I with LIST-II.

LIST-I		LIST-II
A.	Investing Activities	I.	Interest paid
B.	Financing Activities	II.	Interest received
C.	Extraordinary Items	III.	Money-Market Instruments
D.	Cash Equivalents	IV.	Loss due to earthquake

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → A-II, B-I, C-IV, D-III

A cash flow statement sorts cash flows into operating, investing and financing activities, and shows the result as a change in cash and cash equivalents. For a company whose business is not lending or borrowing, interest received and interest paid are not operating items.

(A) Investing Activities — this matches (II) Interest received. Interest is earned on investments, so its receipt is an investing inflow.

(B) Financing Activities — this matches (I) Interest paid. Interest is the cost of borrowed funds, so its payment is a financing outflow, along with dividends paid and repayment of loans.

(C) Extraordinary Items — this matches (IV) Loss due to earthquake. An earthquake loss is not a regular event of the business, so it is an extraordinary item and is shown separately.

(D) Cash Equivalents — this matches (III) Money-Market Instruments. Cash equivalents are short-term, highly liquid investments that can be turned into a known amount of cash at little risk, usually maturing within three months; money-market instruments such as treasury bills and commercial paper are the usual example.

NCERT (2026-27 edition):
Treatment of Some Peculiar Items – “… 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 – “Extraordinary items Extraordinary items are not the regular phenomenon, e.g., loss due to theft or earthquake or flood. Extraordinary items are non-recurring in nature and hence cash flows associated with extraordinary items should be classified and disclosed separately as arising from operating, investing or financing activities. This is done to enable users to understand their nature and effect on the present and future cash flows of an enterprise.”

NCERT (2026-27 edition):
Cash and Cash Equivalents – “… Cash and Cash Equivalents consist of cash in hand and balances with banks, and investments in money-market instruments.”