Question

Purchase of machinery for cash will result in:

• A. Increase in Operating Activities
• B. Increase in Investing Activities
• C. Increase in Financing Activities
• D. No effect on Cash Flow Statement

Hint:

Purchase or sale of fixed assets always comes under Investing Activities in Cash Flow Statement.

Answer 1

The Correct Option is B

Concept: Purchase or sale of fixed assets affects Investing Activities in Cash Flow Statement.

Step 1: Understanding machinery purchase.
Machinery is a fixed asset. Purchase of fixed asset involves: \[ \text{Outflow of cash} \]

Step 2: Classification in Cash Flow Statement.
Cash spent on purchase of machinery is shown under: \[ \text{Investing Activities} \]

Step 3: Final answer.
Thus: \[ \boxed{\text{Investing Activities}} \] Correct option: \[ \boxed{(B)} \]