Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

13. Statement of Cash Flows

Introduction to the Statement of Cash Flows

Financial Accounting

13. Statement of Cash Flows

Introduction to the Statement of Cash Flows

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Multiple Choice

Which one of the following is classified as a cash flow from an investing activity on the statement of cash flows?

Payment of interest on a loan

Payment of dividends to shareholders

Purchase of equipment for cash

Receipt of cash from customers

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Verified step by step guidance

Understand the classification of cash flows: The statement of cash flows categorizes cash flows into three main activities: operating, investing, and financing. Investing activities generally involve transactions related to the acquisition or disposal of long-term assets and investments.

Analyze the options provided: Payment of interest on a loan is classified as an operating activity because it relates to the cost of borrowing funds. Payment of dividends to shareholders is classified as a financing activity because it involves returning funds to investors.

Focus on the correct answer: Purchase of equipment for cash is classified as an investing activity because it involves the acquisition of a long-term asset, which is a typical investing activity.

Understand why receipt of cash from customers is not the correct answer: Receipt of cash from customers is classified as an operating activity because it relates to the core business operations of generating revenue.

Conclude the classification: The purchase of equipment for cash is the correct example of a cash flow from an investing activity, as it directly involves the use of cash to acquire a long-term asset.