Which of the following is a cash outflow?
a. a new issue of bonds
b. a decrease in accounts receivable
c. an increase in plant
d. an increase in accounts payable

What conclusion did you come up with from your own research?

Cash outflow means increase in asset or decrease in liabilities. Now study each of the options and decide which of them is an outflow.

a. a new issue of bonds - increases cash
b. a decrease in accounts receivable - increases cash
c. an increase in plant- decreases cash
d. an increase in accounts payable- increases cash

Quote:

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Originally Posted by rehmanvohra

Cash outflow means increase in asset or decrease in liabilities.

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Not true. If cash flows out, it means you have less of it after the fact, but it may or may not change the total amount of either assets or liabilities. For example, if you buy raw materials with cash your net assets are unchanged, since you've swapped cash assets for a phsyical assets.

Quote:

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Originally Posted by rehmanvohra

Now study each of the options and decide which of them is an outflow.

a. a new issue of bonds - increases cash
b. a decrease in accounts receivable - increases cash
c. an increase in plant- decreases cash
d. an increase in accounts payable- increases cash

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This is confusing. Your terminology "increases cash" means the amount of cash the company has on hand is increased, which is the opposite of what the question asked. Also item d does not involve cash flow - not paying a bill neither increases nor decreases cash.

Quote:

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Originally Posted by ebaines

Not true. If cash flows out, it means you have less of it after the fact, but it may or may not change the total amount of either assets or liabilities. For example, if you buy raw materials with cash your net assets are unchanged, since you've swapped cash assets for a phsyical assets.



This is confusing. Your terminology "increases cash" means the amount of cash the company has on hand is increased, which is the opposite of what the question asked. Also item d does not involve cash flow - not paying a bill neither increases nor decreases cash.

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Please refer to the following link. It might help clearing confusion.

http://www.accounting4management.com...cash_flows.htm

I stand corrected - d does indeed cause a change in cash flow.

Quote:

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Originally Posted by ebaines

I stand corrected - d does indeed cause a change in cash flow.

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Thanks. I am pleased to be of help.

So you have solved your homework question.