Question : Prince Ltd. purchased machinery of Rs.10,00,000 issuing a cheque of Rs.2,50,000 and 10% Debentures of Rs.7,50,000. In the Cash Flow Statement, the transaction will be shown as _____.
Option 1: Outflow under Investing Activity Rs.10,00,000, inflow under Financing Activity as Receipt for debentures Rs.7,50,000.
Option 2: Outflow under Investing Activity Rs.2,50,000
Option 3: Inflow of Rs.7,50,000 as Financing Activity
Option 4: None of the above
Correct Answer: Outflow under Investing Activity Rs.2,50,000
Solution : In this case, only Rs.250000 is shown in the cash flow statement because the issue of debenture is not an outflow of cash only the cheque issued of Rs. 250000 will be shown in the cash flow statement as Outflow under Investing Activity Rs. 2,50,000.
Hence the correct answer is option 2.
