Question

Which of the following transactions will result in the flow of cash?
(1) Deposited Rs 40,000 into the bank.
(2) Withdrew cash from bank Rs 54,000.
(3) Sold marketable securities of Rs 25,000 at par.
(4) The sold machinery of the book value of Rs 50,000 at a gain of  Rs 10,000

Answer 1

The sold machinery of the book value of Rs 50,000 at a gain of  Rs 10,000

Sale of the machinery of the book value Rs 50,000 at a gain of Rs 10,000; implies that Rs  60,000 will be received in cash. This is the only transaction that results in flow (inflow) of cash into the business. Deposit of cash into the bank, withdrawal of cash from bank and sale of marketable securities are just the cash management activities of a business. They do not involve any cash flow.