UGC NET COMMERCE July 2018 Q9
- Option : D
- Explanation : Financing Activities: The separate disclosure of cash flows arising from financing activities is important because it is useful in predicting claims on future cash flows by providers of funds (both capital and borrowings) to the enterprise. Examples of cash flows arising from financing activities are:
∎ Cash proceeds from issuing shares or other similar instruments;
∎ Cash proceeds from issuing debentures, loans, notes, bonds, and other short or long term borrowings; and
∎ Cash repayments of amounts borrowed.
Reporting Cash Flows from Operating Activities: An enterprise should report cash flows from operating activities using either:
∎ The direct method, whereby major classes of gross cash receipts and gross cash payments are disclosed; or
∎ The indirect method, whereby net profit or loss is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments, and items of income or expense associated with investing or financing cash flows.
