Accountancy Part BCash Flow Statement

X Ltd. sold machinery having a book value of Rs. 25,000 (on which acc…

X Ltd. sold machinery having a book value of Rs. 25,000 (on which accumulated depreciation of Rs. 5,000 had been charged) at a profit of Rs. 3,000. The cash flow from investing activities will be :

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → Rs. 28,000

The cash flow from investing activities on a sale of machinery is the cash actually received from the sale. When an asset is sold at a profit, the cash received is its book value plus the profit.

Book value of machinery = Rs. 25,000

Profit on sale = Rs. 3,000

Sale proceeds = Rs. 25,000 + Rs. 3,000 = Rs. 28,000

The accumulated depreciation of Rs. 5,000 has already been deducted to arrive at the book value of Rs. 25,000. It is not a cash item, so it is not added again.

NCERT (2026-27 edition):
Cash Flows – “‘Cash Flows’ implies movement of cash in and out due to some non-cash items. Receipt of cash from a non-cash item is termed as cash inflow while cash payment in respect of such items as cash outflow. For example, purchase of machinery by paying cash is cash outflow while sale proceeds received from sale of machinery is cash inflow. Other examples of cash flows include collection of cash from trade receivables, payment to trade payables, payment to employees, receipt of dividend, interest payments, etc.”