CBSE Class 12-commerce Answered

• These are those activities that change the size and composition of the owner’s capital (i.e., Equity and Preference Share Capital in case of a company) and borrowings of the enterprise.
• It is useful in estimating claims on cash flows by lenders of funds in future and therefore, are shown separately.
• It is computed by analysing change in Equity and Preference Share Capital, Debentures and other borrowings. It also takes into consideration the amounts paid on account of interest (only in case of non-financing companies) and dividend (all types of companies).
• If shares or debentures are issued at a premium, Cash Flow Statement shows total cash received from the issue that includes both nominal value and the premium.
• Any amount of share issue expenses and underwriting commission is a cash outflow from financing activities.
• It does not take into consideration bonus issue as it is just a capitalisation of reserves for which the company does not receive any cash for it. Similarly, conversion of debentures into new debentures or shares involves no cash flow and therefore not considered in a cash flow statement.

For more information on Financing Activities, please do refer our Revision Notes and our Text Book Solutions providing complete solultions along with the detailed workings.