[ISC] Q. 3 Cash Flow Statement Solution TS Grewal Class 12 (2026-27)
Solution of Question number 3 of the Cash Flow Statement of TS Grewal Book 2026-27 session ISC Board?
State which of the following transactions are classified or shown as Financing Activity:
(i) Loan taken from Bank
(ii) Issue of Debentures
(iii) Issue of Shares
(iv) Redemption of Debentures
(v) Buy-back of shares
(vi) Dividend paid
Solution:-
(i) Loan taken from Bank
Reason:
Loan Taken from Bank is a Financing Activity because it is a source of long-term or short-term borrowing used to raise capital for the enterprise. Under accounting standards, raising funds through bank loans directly alters the size and composition of the company’s non-current liabilities and overall debt structure.
(ii) Issue of Debentures
Reason
Issue of Debentures is a Financing Activity because it is a method of raising long-term capital through debt instruments. Under accounting standards, this transaction directly alters the size and composition of the company’s non-current liabilities and overall capital structure.
(iii) Issue of Shares
Reason
Issue of Shares is a Financing Activity because it is a primary method of raising permanent capital for the company. Under accounting standards, this transaction directly alters the size and composition of the enterprise’s owner’s equity and capital structure.
(iv) Redemption of Debentures
Reason
Redemption of Debentures is a Financing Activity because it involves repaying long-term borrowed capital to the debenture holders. Under accounting standards, this transaction is a cash outflow that directly reduces the company’s non-current liabilities and alters its capital structure.
(v) Buy Back of Shares
Reason
Buyback of Shares is a Financing Activity because it involves a company repurchasing its own stock to return capital to its shareholders. Under accounting standards, this cash outflow directly reduces the company’s equity base and alters the overall size and composition of its owner’s capital structure.
(vi) Dividend Paid
Reason
Dividend Paid is a Financing Activity because it represents a distribution of profits directly to the company’s shareholders, who provided the equity capital. Under accounting standards, paying dividends is a cash outflow that stems directly from maintaining and servicing the enterprise’s owner’s capital structure.
