Solve question 4

4 Arvind, an industrialist purchased a machinery worth Rs. 5 crore on hire purchase basis. Categories the :

(i) payment of installment and

(ii) interest into operating / investing or financing activity as per cash flow statement.

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Solution

Dear Student,

(i) Payment of installation - It will be shown under cash flow from investing activities because when cash payments to acquire or construct long-term fixed assets are always considered in investing activities.

(ii) Interest paid - It will be shown under cash flow from financing activities because interest is paid to outsiders from whom we had taken loans,issue of debentures and so on. So, it is a part of financing activity

Regards

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Similar questions

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.

Q. Classify the Following Activities into cash Flows under (A) Operating (B) Investing (C) Financing:
(i) Cash Sales of Goods.
(ii) Income Tax paid.
(iii) Dividend Paid.
(iv) Purchase of Fixed Assets.
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(vii) Cash paid to the Suppliers
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Classify the following into (i) Operating Acivities, (ii) Investing Activities, (iii) Financing Activities and (iv) Cash Equivalents while preparing a Cash Flow Statement:
1. Cash Sales
2. Cash Received from Trade Receivables
3. Purchase of Building
4. Sale of Building
5. Issue of Share Capital or Debentures
6. Buy- back of Equity Shares
7. Dividend Paid
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9. Cash Purchases
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11. Redemption of Debentures and Preference Shares
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15. Manufacturing Expenses
16. Purchase of Goodwill
17. Sale of Patent
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20. Commission and Royalty received
21. Interest received on Investments by (a) Finance company (b) Non Finance company
22. Dividend received on Shares by (a) Finance Company (b) Non - Finance company
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24. Rent received if (a) Company's main business is property business (b) Other business
25. Income Tax Paid
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27. Bank Balance
28. Short- term Deposits in Bank
29. Investment in Short - term or Marketable Securities

Q. In cash flow statement the item of Interest is shown in:
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b. Financing activities
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Q. Identify the transactions as belonging to (i) Operating Activities, (ii) Investing Activities, (iii) Financing Activities and (iv) Cash and Cash Equivalents:

(a) Cash Sale of Goods	(b) Cash Received against Revenue from Services rendered
(c) Cash Purchase of Goods	(d) Cash Paid against Services Taken
(e) Patents Purchased	(f) Marketable Securities
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(i) Purchase of Shares	(j) Repayment of Long-term Loan
(k) Commission Received	(l) Redemption of Debentures
(m) Interest on Debentures	(n) Interest on Investments
(o) Income Tax Paid	(p) Income Tax Paid on Gain of Sale of Asset
(q) Cash Received from Debtors	(r) Cash Paid to Creditors.

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Solve question 4 4 Arvind, an industrialist purchased a machinery worth Rs. 5 crore on hire purchase basis. Categories the : (i) payment of installment and (ii) interest into operating / investing or financing activity as per cash flow statement.

Solve question 4

4 Arvind, an industrialist purchased a machinery worth Rs. 5 crore on hire purchase basis. Categories the :

(i) payment of installment and

(ii) interest into operating / investing or financing activity as per cash flow statement.