Question

Match List-I with List-II

List-I (Items of cash flow)	List-II (Type of activity)
(A) Purchase of tangible assets	(I) Operating activity
(B) Issue of shares	(II) Cash and cash equivalents
(C) Increase in current assets	(III) Investing activity
(D) Marketable securities	(IV) Financing activity

Choose the correct answer from the options given below:

• (A) - (I), (B) - (II), (C) - (III), (D) - (IV)
• (A) - (I), (B) - (IV), (C) - (II), (D) - (III)
• (A) - (IV), (B) - (III), (C) - (I), (D) - (II)
• (A) - (III), (B) - (IV), (C) - (I), (D) - (II)

Answer 1

The Correct Option is D

To solve the given matching problem, we need to correctly pair items from List-I with the corresponding type of activity from List-II. Let's examine each item:

1. Purchase of tangible assets: This is classified as an investment in long-term assets, which falls under Investing activity.
2. Issue of shares: This involves raising capital and thus is categorized under Financing activity.
3. Increase in current assets: Changes in current assets, such as inventory or accounts receivable, are linked to the day-to-day operations and are therefore classified as Operating activity.
4. Marketable securities: These are typically considered Cash and cash equivalents as they can be readily converted into cash.

Using the above rationale, we can match the items as follows:

• (A) Purchase of tangible assets - (III) Investing activity
• (B) Issue of shares - (IV) Financing activity
• (C) Increase in current assets - (I) Operating activity
• (D) Marketable securities - (II) Cash and cash equivalents

Hence, the correct answer is: (A) - (III), (B) - (IV), (C) - (I), (D) - (II).

Answer 2

Let’s match the items from List-I with List-II based on the cash flow activities:

• (A) Purchase of tangible assets: This is an Investing activity, as it involves the acquisition of assets.
• (B) Issue of shares: This is a Financing activity, as it raises funds for the firm.
• (C) Increase in current assets: This is an Operating activity, as it is related to the day-to-day operations of the firm.
• (D) Marketable securities: This is considered part of Cash and cash equivalents, which are also related to liquidity management.

Thus, the correct match is:

(4) (A) - (III), (B) - (IV), (C) - (I), (D) - (II)