Question

If a machine whose original cost is ₹ 40,000, having accumulated depreciation ₹ 12,000, were sold for ₹ 34,000, then while preparing Cash Flow Statement, its effect on cash flow will be:

Options

• Cash flow from financing activities - ₹ 34,000

• Cash flow from financing activities - ₹ 6,000

• Cash flow from investing activities - ₹ 34,000

• Cash flow from investing activities - ₹ 6,000

Answer 1

Cash flow from investing activities - ₹ 34,000

Explanation:

The machine was sold, and the company received ₹ 34,000 in cash. This transaction represents a cash inflow from investing activities, as the buying or selling of fixed assets, such as machines, falls under this category.