Question

A company purchased a piece of equipment for $30,000 and must draft the statement of cash flows. Click on the cash flow statement section in which the cash payment for equipment would be reported?

Answer 1

Answer: Cash flow from investing activities.

Explanation: The above transaction relates to the purchase of fixed assets, that will be used to generate income in future. Therefore, this transaction will be recorded in the investing activity section of a cash flow statement.

The other two sections are operating and financing activity. Operating activity relates to activities involving core business activities. Financing activities relates to transactions involving procurement and distribution of funds.