A company purchased machinery worth Rs 1 crore on hire purchases basis. The accountant seeks your advice in accounting for the :

(i) Payment of instalment and

(ii) Interest under operating, investing and financing activity in the preparation of the Cash Flow Statement.

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Solution

(i) The payment of instalment for the purchase of machinery is categorised under investing activity.

(ii) Interest paid on instalment is categorised under financing activity.

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Similar questions

Q. Prepare an Accounting Equation on the basis of the following transactions:
(i) Started business with cash ₹ 70,000.
(ii) Credit purchase of goods ₹ 18,000.
(iii) Payment made to creditors in full settlement ₹ 17,500.
(iv) Purchase of machinery for cash ₹ 20,000.
(v) Depreciation on machinery ₹ 2,000.

Q. Prepare Accounting Equation on the basis of the following transactions:
(a) Started business with cash ₹ 70,000.
(b) Credit purchase of goods ₹ 18,000.
(c) Payment made to creditors in full settlement ₹ 17,500.
(d) Purchase of machinery for cash ₹ 20,000.

Ganga Ltd purchased a machinery on January 1, 2001, for Rs 5,50,000 and spent Rs 50,000 on its installation. On September 1, 2001, it purchased another machine for Rs 3,70,000. On May 01, 2002 it purchased another machine for Rs 8,40,000 (including installation expenses).

Depreciation was provided on machinery @ $10 %$ per annum on original cost method annually on December 31. Prepare

(a) Machinery account and Depreciation account for the years 2001, 2002, 2003 and 2004.

(b) If depreciation is accumulated in the provision for Depreciation account, then prepare Machine account and Provision for depreciation account for the years 2001, 2002, 2003 and 2004.

Q. The cash price of a machine is Rs. 1,20,000 and its hire purchase price is Rs. 1,50,000 to be paid in five equal yearly installments. If a company purchases the machine on hire purchase basis, the amount of capital expenditure will be _______________.

On 1st April 2014, X Ltd purchased a machinery for Rs.12,00,000. On 1st October 2016 a part of the machinery purchased on 1st April 2014 for Rs. 80,000 was sold for Rs. 45,000 and a new machinery at the cost of Rs. 1,58,000 was purchased and installed on the same date. The company has adopted the method of providing 10 % per annum depreciation on the diminishing balance of the machinery.

Show the necessary ledger accounts assuming that provision for depreciation account and machinery disposal account is maintained. The accounting year ends on 31st March.

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A company purchased machinery worth Rs 1 crore on hire purchases basis. The accountant seeks your advice in accounting for the : (i) Payment of instalment and (ii) Interest under operating, investing and financing activity in the preparation of the Cash Flow Statement.

(i) The payment of instalment for the purchase of machinery is categorised under investing activity. (ii) Interest paid on instalment is categorised under financing activity.

A company purchased machinery worth Rs 1 crore on hire purchases basis. The accountant seeks your advice in accounting for the :

(i) Payment of instalment and

(ii) Interest under operating, investing and financing activity in the preparation of the Cash Flow Statement.

(i) The payment of instalment for the purchase of machinery is categorised under investing activity.

(ii) Interest paid on instalment is categorised under financing activity.