[amp_mcq option1=”The increase in an assets account other than cash” option2=”The decrease in an assets account other than cash” option3=”The decrease in an equity account” option4=”The decrease in a liability account” correct=”option4″]
The correct answer is D. The decrease in a liability account.
An inflow of cash is an increase in the cash account. This can happen in a number of ways, such as:
- Receiving cash from customers for goods or services sold.
- Borrowing money from a bank.
- Selling an asset.
A decrease in an assets account other than cash would not result in an inflow of cash. For example, if a company sells a piece of equipment, the cash account would increase, but the assets account for equipment would decrease. This is a one-for-one exchange, and there is no net inflow of cash.
A decrease in an equity account would also not result in an inflow of cash. For example, if a company issues new shares of stock, the cash account would increase, but the equity account for common stock would increase by the same amount. This is also a one-for-one exchange, and there is no net inflow of cash.
The only option that would result in an inflow of cash is a decrease in a liability account. For example, if a company pays off a loan, the cash account would increase, and the liability account for loans payable would decrease. This is a net inflow of cash.