## Complex Financing Activities
Financing activities include cash flows from:
- Issue of share capital (equity + preference)
- Redemption of preference shares / debentures
- Interest paid on borrowings
- Dividends paid (interim + final, equity + preference)
- Proceeds from / repayment of long-term borrowings
### Non-Cash Transactions: Exclude from Cash Flow
If shares are issued as consideration for an asset acquisition (purchase consideration in kind), no cash changes hands — this is a non-cash transaction.
> Rule: Do NOT include non-cash financing transactions in the cash flow statement. Disclose them separately in notes to accounts.
Identifying non-cash issue: If share capital increases but no corresponding cash inflow appears in the ledger — the issue was non-cash (e.g., shares issued to vendor as purchase consideration).
### Dividends Paid
AS 3 allows dividends paid to be classified as either:
- Financing activities (most common, shown as outflow), OR
- Operating activities (alternative)
Consistency required once a policy is chosen.
Computing actual dividend paid (ledger method):
```
Dividend Payable A/c
──────────────────────────────────
Cash Paid (CIB) ? | Opening X
Closing balance C | P&L declared Y
──────────────────────────────────
Dividend Paid = Opening + Declared − Closing
```
### Redemption of Preference Shares
Cash outflow = Face Value + Premium on Redemption (if any)
If funded partly by bonus shares (non-cash transfer from reserves), only the cash portion appears in cash flow.
### Interest Paid
Actual cash paid (not just accrued) — use the interest payable ledger if opening/closing accruals are given:
```
Interest Paid (actual) = Opening Accrual + P&L Charge − Closing Accrual
```