Question

Identify Financing Activities out of the following transactions:
1. Purchase of securities of a company,
2. Brokerage paid for the above purchaves
3. Sale of securities of a company:
4. Dividend and interest received on securities
5. Dividend paid to the shareholders,
6. Interest paid on borrowings
7. Loans and advances made, and
8. Receipt of loans and advances made.

Answer 1

1.Dividend paid to the Shareholders: It is a financing activity as dividend is paid on the Share Capital of the company. Share Capital is to be shown as Financing Activity as per AS-3 (Revised), Cash Flow Statement.
2. Interest paid on Borrowings: Borrowings are shown as Financing Activity as per AS-3 (Revised), Cash Flow Statement. Interest is related to borrowings, therefore, it will also be shown as Financing Activity.