Which of the following describes the financing activities section of the statement of cash flows? A) It reports on activities that create revenue or expenses for the entity's business. B) It includes interest and dividend income and cash payments for interest expense. C) It includes cash inflows and outflows related to long-term liabilities and equity. D) It includes increases and decreases in long-term assets.

Question

Business

Nehemiah Mooney

10 October, 06:58

Which of the following describes the financing activities section of the statement of cash flows? A) It reports on activities that create revenue or expenses for the entity's business. B) It includes interest and dividend income and cash payments for interest expense. C) It includes cash inflows and outflows related to long-term liabilities and equity. D) It includes increases and decreases in long-term assets.

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Campbell Shea · Answer 1

C) It includes cash inflows and outflows related to long-term liabilities and equity.

Explanation:

Basically there are three types of activities:

1. Operating activities: It includes those transactions which affect the working capital, and it records transactions of cash receipts and cash payments.

2. Investing activities: It records those activities which include purchase and sale of the fixed assets

3. Financing activities: It records those activities which affect the long term liability and shareholder equity balance.

In the above option, option C is a match with the meaning of the financing activities.

Hence, all other options are incorrect.