A company acquires a machine costing Rs. 1,00,000 by issuing fully paid 10,000 equity shares of Rs. 10 each. How should this transaction be reported in the cash flow statement?
Answer
Not shown as cash flow but disclosed in notes
The correct answer is Not shown as cash flow but disclosed in notes — Select the option that states the transaction is not shown as cash flow but disclosed in notes.
Step-by-step solution
- Recognise that the transaction involves no cash exchange; shares are issued for a non‑cash asset.
- Such non‑cash investing and financing activities are not recorded in any cash flow section.
- The appropriate treatment is to disclose the transaction in the notes to the cash flow statement.
- Select the option that states the transaction is not shown as cash flow but disclosed in notes.
Common mistake: Recording the transaction as a cash outflow under investing activities
Concept tested: Non‑cash investing and financing activities
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