The purchase of machinery is not a source of cash.

The external sources of cash are

i) Issue of new shares. In case shares have been issued for cash, the net cash received (i.e., after deducting expenses on the issue of shares or discount on the issue of shares) will be taken as a source of cash.

(ii) Raising long-term loans. Long-term loans such as issues of debentures, loans from Industrial Finance Corporation, State Financial Corporation, IDBI, etc., are sources of cash. They should be shown separately.

(iii) Purchase of plant and machinery on deferred payments. In case plant and machinery have been purchased on a deferred payment system, it should be shown as a separate source of cash to the extent of deferred credit. However, the cost of machinery purchased will be shown as an application of cash.

(iv) Short-term borrowings cash credit from banks. Short-term borrowing, etc., from banks, increase cash available and they have to be shown separately under this head.

(V) Sale of fixed assets, investments, etc. It results in the generation of cash and therefore, is a source of cash.