Question : Match List-I with List-II.
|
List-I (Items of cash flow) |
List-II (Type of activity) |
|
|
(A) |
Purchase of tangible assets |
(I) Operating activity |
|
(B) |
Issue of shares |
(II) Cash and cash equivalents |
|
(C) |
Increase in current assets |
(III) Investing activity |
|
(D) |
Marketable securities |
(IV) Financing activity |
Choose the correct answer from the options given below:
Option 1: (A) - (I), (B) - (II), (C) - (III), (D) - (IV)
Option 2: (A) - (I), (B) - (III), (C) - (II), (D) - (IV)
Option 3: (A) - (I), (B) - (II), (C) - (IV), (D) - (III)
Option 4: (A) - (III), (B) - (IV), (C) - (I), (D) - (II)
Correct Answer: (A) - (III), (B) - (IV), (C) - (I), (D) - (II)
Solution : Operating activity is the principal revenue producing activity of an enterprise. Investing activities relate to purchase and sale of long-term assets or fixed assets such as machinery, furniture, land and building, etc. Financing activities are associated with capital or long-term funds of the firm, and the financing activities bring about change in capital and borrowed funds. Purchase of tangible assets is related to the outflow of cash under investing activity. Issue of shares represents financing activity. Change inassets or liabilities represents operating activity. Marketable securities represent cash and cash equivalents.(A)-(III), (B)-(IV), (C)-(I), (D)-(II)
