Question

Indicate whether each of the following activities would be reported on the statement of cash flows as (a) an operating activity, (b) an investing activity, or (c) a financing activity:
1. Cash received by issuing common stock.
2. Cash received for fees earned from customers.
3. Cash paid for land and building.
4. Cash paid for dividends.

Answer 1

The classification of the above will be as follows:

• 1. Cash received by issuing common stock - Financing activity.
• 2. Cash received for fees earned from customers. - Operating activity.
• 3. Cash paid for land and building. - Investing activity.
• 4. Cash paid for dividends. - Financing activity.

Sections in the Statement of Cash Flows

Financing activities relate to raising capital for the business. They will therefore include equity and dividends.

Operating activities relate to those that have to do with the business's daily business activities. Fees from customers are revenue and so will go here.

Investing activities relate to fixed assets and securities issued by other companies.

In conclusion, the cash statement allows for cash transactions to be classified in several ways.

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