Question 1 of 22beginner💡 UnderstandShort Answer4 marks

Classify the following activities into operating activities, investing activities, financing activities, cash equivalents. 1. Purchase of machinery. 2. Proceeds from issue of equity share capital. 3. Cash revenue from operations. 4. Proceeds from long-term borrowings. 5. Proceeds from sale of old machinery. 6. Cash receipt from trade receivables. 7. Trading commission received. 8. Purchase of non-current investment. 9. Redemption of preference shares. 10. Cash purchases. 11. Proceeds from sale of non-current investment. 12. Purchase of goodwill. 13. Cash paid to supplier. 14. Interim dividend paid on equity shares. 15. Employee benefits expenses paid. 16. Proceeds from sale of patents. 17. Interest received on debentures held as investments. 18. Interest paid on long-term borrowings. 19. Office and administrative expenses paid. 20. Manufacturing overheads paid. 21. Dividend received on shares held as investment. 22. Rent received on property held as investment. 23. Selling and distribution expenses paid. 24. Income tax paid. 25. Dividend paid on preferences shares. 26. Under-writing commission paid. 27. Rent paid. 28. Brokerage paid on purchase of non-current investment. 29. Bank overdraft. 30. Cash credit. 31. Short-term deposit. 32. Marketable securities. 33. Refund of income-tax received.

Correct Answer

Operating Activities: 3. Cash revenue from operations 6. Cash receipt from trade receivables 7. Trading commission received 10. Cash purchases 13. Cash paid to supplier 15. Employee benefits expenses paid 19. Office and administrative expenses paid 20. Manufacturing overheads paid 23. Selling and distribution expenses paid 24. Income tax paid 27. Rent paid 33. Refund of income-tax received

Investing Activities:

  1. Purchase of machinery
  2. Proceeds from sale of old machinery
  3. Purchase of non-current investment
  4. Proceeds from sale of non-current investment
  5. Purchase of goodwill
  6. Proceeds from sale of patents
  7. Interest received on debentures held as investments
  8. Dividend received on shares held as investment
  9. Rent received on property held as investment
  10. Brokerage paid on purchase of non-current investment

Financing Activities: 2. Proceeds from issue of equity share capital 4. Proceeds from long-term borrowings 9. Redemption of preference shares 14. Interim dividend paid on equity shares 18. Interest paid on long-term borrowings 25. Dividend paid on preference shares 26. Under-writing commission paid

Cash Equivalents: 29. Bank overdraft 30. Cash credit 31. Short-term deposit 32. Marketable securities

Exercise: Test your Understanding - I | Q: 1 | (Page 7)
For More Understanding

Explanation

Operating activities include principal revenue-producing activities like sale of goods, services, and related expenses. Investing activities relate to acquisition and disposal of long-term assets and investments. Financing activities relate to changes in equity and borrowings. Cash equivalents are short-term, highly liquid investments.

Solution Steps

  1. Step 1: Identify activities related to revenue operations as Operating Activities

  2. Step 2: Identify activities related to purchase/sale of fixed assets and investments as Investing Activities

  3. Step 3: Identify activities related to equity, borrowings, dividends, and interest as Financing Activities

  4. Step 4: Identify short-term liquid items as Cash Equivalents

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