Accountancy Part BCash Flow Statement

Identify the cash transaction from the following:

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → Purchase of land by taking loan

A cash flow statement leaves out investing and financing transactions that do not use cash. Taking a loan brings cash in (financing inflow), and paying for the land takes cash out (investing outflow), so this is a cash transaction.

Why the other options are incorrect

Option (1) Purchase of machinery by issue of preference shares — Incorrect. Shares are given in place of cash, so no cash moves.
Option (2) Redemption of Debentures by issuing equity shares — Incorrect. One security replaces another without any cash.
Option (3) Issue of Debentures as collateral security — Incorrect. No money is received for collateral debentures.

NCERT (2026-27 edition):
Non-cash Transactions – “As per AS-3, investing and financing transactions that do not require the use of cash or cash equivalents should be excluded from a cash flow statement. Examples of such transactions are – acquisition of machinery by issue of equity shares or redemption of debentures by issue of equity shares.”