Question

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

• A. Cash withdrawn from bank rupee 71,000
• B. Issue of 9% debentures of rupee 1,00,000 to the vendors of machinery
• C. Received from debtors rupee 74,000
• D. Redeemed 10% debentures by converting into equity shares

Hint:

A transaction results in a flow of cash only when there is an actual movement of cash into or out of the business.

Answer 1

The Correct Option is C

Withdrawing cash from a bank is an internal transfer and therefore does not constitute a cash flow. Issuing debentures to vendors in exchange for machinery is a non-cash transaction. Receiving cash from debtors represents a cash inflow, indicating a flow of cash. Redeeming debentures by converting them into equity shares is also a non-cash transaction.