Question

Match List I with List II in context g cashflow statement

	LIST I: Major Head		LIST II: Sub Head
(A)	Sale of fixed asset	(I)	Outflow in operating Activities.
(B)	Purchase of Goodwill	(II)	Inflow in Investing Activities
(C)	Tax Paid	(III)	Outflow in Investing Activities
(D)	Dividend Paid	(IV)	Outflow in Financing Activities

Choose the correct answer from the options given below:

• A. A-II. B-I. C-IV, D-III
• B. A-II. B - III, C-I. DIV
• C. A-II. B-I. C-III. DIV
• D. A-III, B-II, C-IV, D-I

Answer 1

The Correct Option is B

To match the items in List I with those in List II regarding a cash flow statement, we analyze the nature of each transaction and categorize them according to the proper cash flow activity:

• Sale of fixed asset: Cash received from selling a fixed asset is an inflow in Investing Activities because it involves the sale of a long-term asset. Therefore, (A) matches with (II).
• Purchase of Goodwill: Goodwill purchase requires cash outflow for an intangible asset, which falls under outflow in Investing Activities. So, (B) matches with (III).
• Tax Paid: Taxes generally relate to the core operations of a business and reflect cash outflows in the course of regular business operations, thus outflow in Operating Activities. Hence, (C) matches with (I).
• Dividend Paid: Paying dividends involves cash outflows to shareholders and is associated with financing as it impacts shareholders' equity, which is an outflow in Financing Activities. Consequently, (D) matches with (IV).

From this analysis, the correct answer is: A-II, B-III, C-I, D-IV.