Which of the following is excluded in Cash Flow Statement?
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Shift 30/05/2023 8:30 AM - 10:30 AM
Correct Answer
Detailed Explanation
Acquisition of Machinery by Issuing Equity Shares:
This involves obtaining machinery by issuing equity shares, which represents a non-cash transaction. Equity shares are a form of ownership in the company, and their issuance doesn't directly impact the cash flow. The machinery acquired is recorded on the balance sheet, but there is no immediate cash inflow or outflow.
Shares Issued at a Premium/Discount:
When shares are issued at a premium or discount, the cash received from the issuance is included in the financing activities section of the Cash Flow Statement. The premium represents additional funds received, and the discount represents a reduction in the funds received.
Debentures Issued:
Similar to shares, the issuance of debentures involves a cash inflow and is included in the financing activities section. The funds received from issuing debentures contribute to the overall cash position of the company.
Sale of Machinery Against Bank Draft:
The sale of machinery involves a cash transaction. If the payment is received through a bank draft, it is still considered a cash sale, and the cash received is reflected in the cash flow from investing activities.
In summary, the Cash Flow Statement focuses on actual cash movements. Transactions involving equity shares (without a direct cash exchange) are excluded, as they are non-cash activities. Other financing and investing activities that involve actual cash, such as issuing debentures or selling machinery for cash, are appropriately included in the Cash Flow Statement.
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