Cash Flow Statement

The correct option is (D) : (C), (A), (E), (B), (D)

Understanding Cash Flow Activities:
Cash Flow Statements categorise cash flows into operating, investing, and financing activities. Financing activities relate to how a company raises capital and repays it.
Explanation:

Issue of Shares: Involves raising capital from shareholders.

Repayment of Bank Loan: Reduces the company's debt.

Redemption of Debentures: Similar to repaying a loan, it reduces long-term debt.
Therefore Rent received is classified as Cash flow from operating activities. The key to finding the odd one out here is finding the option that does not involve loan.

Understanding Cash Flow Activities:
Investing Activities relate to the purchase and sale of long-term assets and other investments.
Operating Activities relate to normal activities of a business.
Financing activities relate to funding from shareholders, debentures and loans.

Explanation: Here, 50% is paid by cheque for purchase of long term machinery. If full amount was paid by cheque, that will be Rs (5,00,000. However, the question states that bond has been executed, hence the total cash paid out is 5,00,000/2, i.e. 2,50,000 Rs and since the amount is being paid, the activity involves Cash outflow of (2,50,000Rs).
Reasons to Reject Other Options:
In any machinery related questions, the activity is an Investing Activity.
We are paying some amount, so the activity has to be outflow rather than inflow.

Understanding Cash Flow Statement Components:
\begin{itemize} \item
The Accounting basis for Cash Flow Statement is (A): Cash basis is used to determine accurate measures of cash flow. \item
Dividend paid on Equity and Preference capital comes under (B): Cash outflow from financing activities is recorded when dividends are paid to shareholders. \item
It can not be considered as cash and cash equivalents (C): Investment in shares is not part of cash and cash equivalents due to its illiquid nature. \item
It can be classified as cash and cash equivalents (D): Treasury bills are classified as cash equivalents due to their short maturity and liquidity. \end{itemize} Thus, the correct matching is (A)-(II), (B)-(IV), (C)-(I), (D)-(III).

Understanding Cash Transactions:
A cash transaction involves the actual movement of cash (or cash equivalents) into or out of a business.
Explanation:
Purchase of land by taking loan: Here cash moves into your organization.
All the other transactions include exchange of shares, debentures in place of payment, so no cash is transacted.

(A) Cash Outflows from Financing Activities → Redemption of Debentures → Correct.
(B) Cash Inflows from Operating Activities → Cash from royalties, fees, commissions, other revenues → Correct.
(C) Cash and Cash Equivalents → Current Investment → Correct.
(D) Cash Inflows from Investing Activities → Cash from disposal of fixed assets including intangibles → Correct. Conclusion: The correct match is (A)-(I), (B)-(III), (C)-(II), (D)-(IV). Final Answer:

In the cash flow statement, activities are categorized as follows:
- (A) - (III): Sale of Investment is an investing activity since it involves managing long-term assets.
- (B) - (II): Depreciation is a non-cash expense and is added back under operating activities to adjust profit to cash flow.
- (C) - (I): Repayment of Long-Term Borrowings is a financing activity related to capital structure management.
- (D) - (IV): An increase in Current Assets reduces cash flow from operating activities, so it is deducted.

Cash flow from operating activities starts with net profit. Non-cash expenses (goodwill written off) and losses on sale of assets are added back because they reduce profit but do not affect cash.
Therefore, Cash flow from operating activities = Rs 35,000 + Rs 16,000 + Rs 5,000 = Rs 56,000.

The purchase of land is considered an investing activity. According to the cash flow statement classification, investing activities include the acquisition and disposal of long-term assets, such as land, buildings, and equipment. Since a cheque is being used, it is a cash outflow associated with an investment in long-term assets.
Thus, the purchase of land using a cheque is classified under Investing Activity.

Step 1: Calculation of cash flow from operating Activities
Cash flows statement generally starts with cash flows from operating activities, as it reflects core business cash generation.
Step 2: Calculation of cash flow from investing Activities
Next, cash flows from investing activities like purchase and sale of fixed assets are calculated.
Step 3: Calculation of cash flow from financing Activities
Then, cash flows from financing activities such as loans and capital changes are calculated.
Step 4: Opening Balance of cash and cash Equivalents
Opening balance of cash is noted, usually to reconcile the net changes in cash flows.
Step 5: Closing Balance of Cash and Cash Equivalents
Finally, closing balance is computed to confirm the cash position at the end of the period.
Step 6: Conclusion
Hence, the correct sequence is:
C (Operating), A (Investing), D (Financing), B (Opening Balance), E (Closing Balance).