Accountancy Part BCash Flow Statement

Calculate and state the nature of activity under cash flow statement:…

Calculate and state the nature of activity under cash flow statement:

Acquired Machinery for ₹5,00,000 paying 50% by cheque and executing a bond for the balance payable:

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → Outflow Investing activity ₹(2,50,000)

Buying machinery is an investing activity. Only the part paid in cash is a cash flow; the part settled by a bond is a non-cash transaction and is left out of the cash flow statement.

Cost of machinery = ₹5,00,000
Paid by cheque = 50% of ₹5,00,000 = ₹2,50,000
Balance by bond = ₹2,50,000 (non-cash)
Cash flow = ₹2,50,000 outflow from investing activities

NCERT (2026-27 edition):
Exercises

Extract from the NCERT textbook

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.”