Question

Crox Ltd. purchased machinery of ₹ 25,00,000 issuing a cheque of ₹ 15,00,000 and 10% Debentures of ₹ 10,00,000. In the Cash Flow Statement, the transaction will be shown as ______.

Options

• Outflow of Cash under Investing Activity ₹ 25,00,000, inflow of cash under Financing Activity as receipt for debentures ₹ 10,00,000.

• Outflow of Cash under Investing Activity ₹ 15,00,000.

• Inflow of Cash ₹ 10,00,000 as Financing Activity.

• None of the above.

Answer 1

Outflow of Cash under Investing Activity ₹ 15,00,000.

Explanation:

Only actual cash transactions are recorded in a Cash Flow Statement. The total cost of the machinery is ₹ 25,00,000, but Crox Ltd. paid only ₹ 15,00,000 via cheque, which represents an actual cash outflow under Investing Activities for purchasing a fixed asset. The remaining ₹ 10,00,000 was settled directly by issuing 10% Debentures, which is a non-cash transaction and will not be recorded anywhere in the Cash Flow Statement itself, though it is disclosed separately in the notes.