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Cornerstones of Financial Accounti...

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Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Exercise 1-33 Business Activities

Listed below are various activities that companies engage in during a period.

a. Purchase Of equipment

b. Payment of a dividend

c. Purchase Of supplies

d. Sale of equipment

e. Sale Of goods or services

f. Borrow money from a bank

g. Contribution Of cash by owners

Required:

For each of the activities listed above, classify the activity as operating (O), investing (I), or financing (F).

To determine

Concept Introduction:

Cash Flow statement:

The Cash flow statement shows the movement of cash during a particular period. The Cash flows are categorized into three categories as follows:

  • Operating Activities: Operating Activities are day to day business transactions, for example sales purchase etc.
  • Investing Activities: Investing Activities belong to the sale or purchase of assets or investments of a business. For example sales of fixed assets etc, purchase of investments.
  • Financing Activities: Financing Activities includes the transactions related to raising business finds through equity or debts. For example, issuance of shares and payment of dividend to shareholders.

To Indicate:

The type of the activity for each of the given transactions.

Explanation

The type of the activity for each of the given transactions is explained as follows:

    Transaction Type of activity
    a.IPurchase of equipments is an Investing activity for the business
    b.FPayment of Dividend is an Financing activity for the business
    c.OCash payment to suppliers is an operating activity for the business
    d...

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