Understanding Cash Inflows and Outflows

A cash inflow represents any transaction that results in money coming into the business. Conversely, a cash outflow is when money leaves the business. We need to identify the option that does not represent money entering the business.

Analyzing the Options

• Decrease in creditors: This means the business has paid off its liabilities to suppliers or lenders. Paying off debts requires cash, hence this is a cash outflow, not an inflow.
• Decrease in debtors: This signifies that customers who owed money to the business have paid their outstanding balances. Receiving payments from debtors brings cash into the business, making it a cash inflow.
• Issue of shares: When a company issues new shares, it sells them to investors in exchange for cash. This results in cash coming into the company, hence it is a cash inflow.
• Sale of a fixed asset: Selling a long-term asset, such as equipment or property, generates cash for the business. Therefore, this is a cash inflow.

Conclusion on Cash Inflow

Based on the analysis, a decrease in creditors represents a payment made by the business, which is a cash outflow. The other options all represent transactions where cash enters the business.

The transaction that is not a cash inflow is a decrease in creditors.