Question

Which of the following transactions will result in 'Flow of Cash’?
(a) Deposited Rs 10,000 into the bank.
(b) Withdrew cash from bank Rs 14,500.
(c) Sale of the machinery of the book value of Rs 74,000 at a loss of Rs 9,000.
(d) Converted Rs  2,00,000 9% debentures into equity shares.

Answer 1

Sale of the machinery of the book value of Rs 74,000 at a loss of Rs 9,000.

Sale of machinery is the only transaction that results in the flow of cash into the business. Deposit and withdrawal of Cash are cash management activities and do not involve any cash flow. Conversion of debentures into equity shares is a change in capital structure of the company.