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 = 2,50,000
Paid by cheque = 20%
Payment by bank = 2,50,000 x 20/100
                          = 50,000 (cash outflow)

Payment due and will be paid by bond = 2,50,000 - 50,000
                                                        = 2,00,000 (No cash outflow)

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