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      Question

      A firm raises Rs.10,00,000 by issuing common equity.

      Which of the following financial statements will reflect the transactions?
      A Income statement and statement of owners’ equity Correct Answer Incorrect Answer
      B Balance sheet, income statement, and cash flow statement Correct Answer Incorrect Answer
      C Balance sheet, cash flow statement, statement of owners’ equity Correct Answer Incorrect Answer
      D Balance sheet and Income statement Correct Answer Incorrect Answer
      E Income statement and Cashflow Statement Correct Answer Incorrect Answer

      Solution

      The Rs.10,00,000-capital raised will appear in cash flow statements as a cash flow from financing activity. It will also appear as a contributed capital in owners’ equity. Both assets (cash) and equity (liabilities side of the balance sheet) increase in the balance sheet. The income statement is unaffected by these transactions

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