While preparing a Funds Flow Statement, which of the following accounting transactions are classified as "Sources of Funds" (Inflows)? 1. Issue of Equity Shares 2. Issue of Debentures 3. Raising Long-Term Loans 4. Disposal/Sale of Fixed Assets 5. Disposal/Sale of Long-Term Investments

Core Financial Principle A Funds Flow Statement highlights changes in the financial position of a business by listing the Sources of Funds (where working capital comes from) and Application of Funds (how working capital is spent). A transaction serves as a Source of Funds if it results in a net increase in working capital (typically by bringing in cash or current assets through long-term or non-current accounts). Analysis of Items: • 1, 2, & 3 (Issue of Capital & Long-Term Borrowings): When a firm issues new shares, debentures, or takes on long-term institutional loans, it receives fresh liquidity (Current Assets increase). This represents long-term capital coming into the business. • 4 & 5 (Sale of Fixed Assets & Investments): Selling long-term assets (like machinery or land) or non-current investments liquidates non-current capital back into active cash/receivables (Current Assets increase). Since all five actions bring capital into the working capital pool, they are all categorized strictly as Sources of Funds.