A company acquired machinery for ₹2,50,000 by paying 20% by cheque and accepting a bond for the balance payable after 5 years. The result is:

₹50,000 outflow from Investing Activity

The correct answer is Option (1) - ₹50,000 outflow from Investing Activity.

Purchase of machinery = 250000
Paid by cheque = 20%
Payment by bank = 250000 x 20/100
                          = 50000 (cash outflow)

Payment due and will be paid by bond = 250000 - 50000
                                                        = 200000 (No cash outflow)

As purchase of machinery is a fixed asset so it is an investing activity.