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Question

Which of the following is an application of funds?


A
Purchase of machinery.
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B
Profit earned during the year.
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C
Issue of share capital.
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D
Long term loan raised.
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Solution

The correct option is B Purchase of machinery.
Fund Flow statement is prepared to show the sources and application of funds. It is prepared by incorporating the various sources through which the funds are received and the items where the funds are utilized. 

Purchase of Machinery is an application of funds.
Profit earned during the year is a source of fund
issue of share capital is a source of fund
Long term loan raised is a source of fund.

Accountancy

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