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Question
Premium received on issue of shares is shown as ______.
Options
Inflow under Operating Activities.
Inflow under Financing Activities.
Inflow under Investing Activities.
Outflow under Financing Activities.
MCQ
Fill in the Blanks
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Solution
Inflow under Financing Activities.
Explanation:
When a company issues shares at a price higher than their face value, the extra amount received is called a securities premium. Because the entire transaction is directly related to raising long-term capital and changing the company’s equity structure, the complete amount collected (both the face value and the premium) represents an influx of funds. Therefore, it is classified as a cash inflow under Financing Activities on the Cash Flow Statement.
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