Question

Describe 3 transactions that would affect the cashflow made by a company but not the profit (clearly explaining why profit would not be affected).

Answer 1

Transactions that would affect the cashflow made by a company but not the profit :

1) Purchase of equipment for $100000.

In the avove transaction equipment account will be debited by $100000 and cash account will be credited by $100000. Purchase of equipment will be shown as "investing activities" as cash outflow. It will not affect profit of company.

2) Issuance of Bond for $50000 at par.

In the avove transaction Bond payable account will be credited by $50000 and cash account will be debited by $50000. Issuance of bond will be shown as "financing activities" as cash inflow. It will not affect profit of company.

3) Cash recived $7500 from accounts receivables for goods sold earlier.

In the above transaction, Cash account will be debited by $7500 and Accounts receivable will be credited by $7500. It will not affect the profit of company.