Accountancy Part BCash Flow Statement

Which of the following does not result in outflow of cash? (A) Deprec…

Which of the following does not result in outflow of cash?

(A) Depreciation

(B) Loss on sale of fixed assets

(D) Goodwill written off

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → (A), (B) and (D) only

An item results in an outflow of cash only if cash actually leaves the business. Non-cash charges reduce profit but pay out nothing.

(A) Depreciation Correct. It is a non-cash charge that spreads the cost of an asset over its life; no cash is paid when it is charged.

(B) Loss on sale of fixed assets Correct. The loss is only the gap between book value and sale price; the sale itself brings cash in.

(C) Purchase of fixed assets Incorrect. Cash is paid to acquire the asset, so it is a cash outflow from investing activities.

(D) Goodwill written off Correct. Writing off goodwill is a book entry; no cash is paid.

NCERT (2026-27 edition):
Indirect Method – “Indirect method of ascertaining cash flow from operating activities begins with the amount of net profit/loss. This is so because statement of profit and loss incorporates the effects of all operating activities of an enterprise. However, Statement of Profit and Loss is prepared on accrual basis (and not on cash basis). Moreover, it also includes certain non-operating items such as interest paid, profit/loss on sale of fixed assets, etc.) and non-cash items (such as depreciation, goodwill written-off, divident declared, etc.”

NCERT (2026-27 edition):
Cash from Investing Activities

Extract from the NCERT textbook