When a company purchases fixed assets on a long term deferred payment basis, it means that the payment for the assets will be made over a long period of time, typically more than a year. It is a common practice for companies to purchase assets in this way as it allows them to spread the cost of acquiring the assets over a longer period of time, making it easier for them to manage their cash flow.



The purchase of fixed assets on a long term deferred payment basis would result in an outflow of cash. This is because the company would need to make a down payment to acquire the assets, and then make regular payments over the course of the deferred payment period. The payments made during this period would be considered cash outflows, as they represent a reduction in the company's cash balance.



The purchase of fixed assets on a long term deferred payment basis would have several impacts on the company's financial statements:

- Balance Sheet: The assets would be recorded on the balance sheet as fixed assets, and the liability for the deferred payments would be recorded as a long-term liability.
- Income Statement: The payments made during the deferred payment period would not be recorded as expenses on the income statement. Instead, they would be recorded as a reduction in the liability on the balance sheet.
- Cash Flow Statement: The cash payments made during the deferred payment period would be recorded as cash outflows on the cash flow statement.



In conclusion, the purchase of fixed assets on a long term deferred payment basis would result in an outflow of cash. While this method of acquiring assets can help companies manage their cash flow, it is important for them to carefully consider the impact it will have on their financial statements.

No flow of cash as asset is purchased on credit