Question

Which of the following is a financing activity for the purpose of preparing a Cash Flow Statement?

Options

• Interest received

• Dividend received

• Royalties received

• Interest paid on debentures

Answer 1

Interest paid on debentures

Explanation:

For a company preparing a Cash Flow Statement as per AS-3:

Interest paid on debentures is classified as a Financing Activity since it represents the cost of acquiring financing. Whereas interest received, dividend received, and royalties received are generally classified as investing activities.