Question

dentify whether each of the following would be reported as an operating, investing, or financing activity on the statement of cash flows:

Line Item Description Activity
a. Purchase of investments
b. Disposal of equipment
c. Payment for selling expenses
d. Collection of accounts receivable
e. Cash sales
f. Issuance of bonds payable

Answer 1

In the statement of cash flows, activities are categorized into three main sections: operating activities, investing activities, and financing activities. Here’s how each of the provided line items would typically be classified:

a. **Purchase of investments** - **Investing Activity**
This involves the acquisition of financial assets or property, which falls under investing activities.

b. **Disposal of equipment** - **Investing Activity**
Selling equipment is also considered an investing activity since it involves the sale of long-term assets.

c. **Payment for selling expenses** - **Operating Activity**
This relates to regular business operations and the costs associated with selling goods or services.

d. **Collection of accounts receivable** - **Operating Activity**
This reflects cash inflows from the core operations of the business and is tied to revenue generation.

e. **Cash sales** - **Operating Activity**
This involves cash received from selling goods or services, thus representing an operating cash flow.

f. **Issuance of bonds payable** - **Financing Activity**
This represents raising funds through debt and is classified under financing activities.

**Summary:**
- a: Investing Activity
- b: Investing Activity
- c: Operating Activity
- d: Operating Activity
- e: Operating Activity
- f: Financing Activity