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Class 12 Tuition > Learn Accountancy > P P Limited is Share Broker Company. G G Limited is...
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P P Limited is Share Broker Company. G G Limited is engaged in manufacturing of packaged food. P P Limited purchased 5,000 equity shares of Rs. 100 each of Savita Limited. G G Limited also purchased 10,000 equity shares of Rs. 100 each of Savita Limited. For the purpose of preparing their respective Cash Flow Statements, under which category of activities the purchase of shares will be classified by P P Limited and G G Limited?

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Accounts master

For GG limited it is an investment so it come in Investing Activity but as PP Ltd business is of selling shares so it will be part of Operating Activity :)
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Tutor

For PP Ltd, it's a business and profit and loss will be shown in operation activity. And for GG Ltd, its investment activity.
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Intellactual Education

Bedore answer this firstly we have to clear the concept of Stock & Assets , things purchased by a trader for resale purpose is considered as stock & for holding purpose considered as assets
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Having expert knowledge in accounts, costing, business law, tax etc.

P P limited is an share broker company hence purchase of share of savita limited is operating activity hence cash out flow from operation. G G limited is not and investing/ share broking company hence it has invested the money in sarita limited, cash out flow from investing activities.
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In case of a share broker, it would be treated as operating activity as routine recurring activites. In case of other than investing concern it would be treated as investing activity.
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B.COM . CA Final pursuing

Investing activities.
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Trainer

P P Ltd. is a Share broker company, so their main revenue earning activity is share trading. As we konw that in cash flow the main revenue earned from those activities are classified as operating activities. Here PP ltd. purchase share only for trading purpose, hence it will appear in there Trading account....
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P P Ltd. is a Share broker company, so their main revenue earning activity is share trading. As we konw that in cash flow the main revenue earned from those activities are classified as operating activities. Here PP ltd. purchase share only for trading purpose, hence it will appear in there Trading account. This activity does not affect the cash flow. 

On the other hand GG is a manufacturing company. For GG the purchase of shares will be considered as Investing activities in cash flow. Gg purchase sshares not for trading purpose. Because their main activity is manufacturing. So they invested thir money in shares. 

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Investing activities.
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Tutor

Balakrishna as per AS-3 share purchase by P.P Ltd. comes under operating activities as selling and purchasing of shares is part of regular business of P.P Ltd and purchase of share by Savita ltd. comes in investing activities.
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ACCOUNTANCY CLASSES BY DHANA MURTHY

1) op.activity in pp ltd 2) INVESTING ACTVITY IN GG LTD
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