Match the following for an enterprise while making a cash flow statement.
| LIST 1 | LIST 2 |
| A) Proposed dividend for the current year | I) Cash outflow |
| B) Purchase of patents | II) Cash inflow |
| C) Issue of debentures for the purchase of machinery | III) No effect |
| D) Sale of goods costing ₹20,000 for ₹25,000 | IV) Contingent liability |
Answer & explanation
Correct answer: option 4
The correct answer is option 4- A-IV, B-I, C-III, D-II.
| LIST 1 | LIST 2 |
| A) Proposed dividend for the current year | IV) Contingent liability |
| B) Purchase of patents | I) Cash outflow |
| C) Issue of debentures for the purchase of machinery | III) No effect |
| D) Sale of goods costing ₹20000 for ₹25000 | II) Cash inflow |
* Proposed dividend for the current year- As per AS-4, Contingencies and Events Occurring after the Balance Sheet Date, Proposed dividend is shown in the Notes to Accounts. It will be shown as contingent liability since it becomes a liability after it is declared (approved) by the shareholders.
* Purchase of patents- Patents are purchased which is an investing activity and purchases makes the cash outflow.
* Issue of debentures for the purchase of machinery- No effect because machinery was purchased for debentures.
* Sale of goods costing ₹20,000 for ₹25,000- The purchase makes cash outflow whereas sale makes cash inflow in the company.