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 of the following is classified as an investing activity on the statement of cash flows?

Issuance of common stock

Payment of dividends

Payment of salaries

Purchase of equipment

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Verified step by step guidance

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

Review the options provided: Analyze each option to determine which category it falls under. For example, issuance of common stock and payment of dividends are financing activities, while payment of salaries is an operating activity.

Focus on the correct answer: The purchase of equipment is classified as an investing activity because it involves acquiring a long-term asset that will be used in the business operations.

Relate the purchase of equipment to the cash flow statement: When equipment is purchased, cash is used to acquire the asset, and this transaction is recorded under the investing activities section of the statement of cash flows.

Conclude the classification: Confirm that the purchase of equipment aligns with the definition of investing activities, as it represents an outflow of cash for the acquisition of a long-term asset.