Question

Which of the following transactions will result in the flow of cash?

Options

• Cash was withdrawn from bank Rs. 71,000.

• An issue of 9% debentures of  Rs. 1,00,000 to the vendors of machinery.

• Received from debtors Rs. 74,000.

• Redeemed 10% debentures by converting the same into equity shares.

Answer 1

Received from debtors Rs. 74,000.

Explanation:

The amount received from debtors, Rs. 74,000, is the only transaction that results in the flow (inflow) of cash into the business, as it would be received in cash. Deposits of cash into a bank and withdrawals of cash from a bank are just the cash management activities of the business. The conversion of debentures into equity shares changes the company’s capital structure.