The activities that result in changes in the size and composition of the owners’ capital and borrowings of the enterprise are called \underline{\hspace{2cm}}.
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- Operating Activities
- Investing Activities
- Managerial Activities
- Financing Activities
The Correct Option is D
Solution and Explanation
Examples include issue of shares, debentures, raising long-term loans, repayment of loans, and payment of dividends.
Such activities help finance the core operations of the business and affect the capital structure.
Therefore, any inflow from investors or lenders and any outflow to them (like dividend or repayment) are classified under financing activities.
Hence, the correct classification for changes in the owners’ capital and borrowings is Financing Activities.
Top Questions on Cash Flow Statement
From the following information, prepare Cash Flow Statement from the operating activities:
Items Rs. Net profit of current year 1,00,000 Transfer to general reserve 10,000 Decrease in debtors 25,000 Decrease in bills payable 20,000 Discount on shares written off 5,000 Increase in stock 18,000 Loss on sale of machine 12,000 Profit on sale of investment 4,000
\[ \text{Cash Flow from Operating Activities} \] \[ \begin{array}{|l|r|} \hline \textbf{Particulars} & \textbf{Rs.} \\ \hline \text{Net Profit before Adjustments} & 1,00,000 \\ \hline \text{Add: Decrease in Debtors} & 25,000 \\ \text{Add: Profit on Sale of Investment} & 4,000 \\ \hline \text{Less: Transfer to General Reserve} & (10,000) \\ \text{Less: Decrease in Bills Payable} & (20,000) \\ \text{Less: Discount on Shares Written Off} & (5,000) \\ \text{Less: Increase in Stock} & (18,000) \\ \text{Less: Loss on Sale of Machine} & (12,000) \\ \hline \text{Net Cash Flow from Operating Activities} & 64,000 \\ \hline \end{array} \]- UP Board XII - 2025
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