Question

Which of the following transactions will result in outflow of cash?

• A. Cash payments to and on behalf of the employees
• B. Cash receipts from royalties
• C. Issue of shares
• D. Dividend received from investments in other enterprises

Hint:

Expenses paid in cash (like salaries, wages, rent) always result in cash outflow.

Answer 1

The Correct Option is A

Let’s identify the nature of each transaction:
(A) Cash payments to employees = cash outflow under operating activities
(B) Royalties received = cash inflow
(C) Issue of shares = cash inflow from financing activity
(D) Dividends received = cash inflow from investing activity
Only (A) represents money going out of the business.