Financial Accounting · Statement of cash flows (excluding partnerships)

Cash Flows from Investing Activities in the Statement of Cash Flows

Updated 11 October 2026 · Fact-checked

Investing activities show cash spent on and received from long-term assets and investments. Work out cash paid for property, plant and equipment (PPE) using a carrying amount working, add disposal proceeds, then add interest and dividends received. Cash paid is an outflow, so show it in brackets. Only cash movements count.

Understand Cash Flows from Investing Activities

The statement of cash flows (IAS 7) splits cash movements into operating, investing and financing activities. Investing activities cover cash spent to acquire long-term assets and cash received when you sell them. They show how much a business is spending to maintain or grow its asset base.

Typical items are cash paid to buy PPE and intangible assets, cash received from selling them, and cash flows on investments in other entities. In the ACCA FA exam, interest received and dividends received are normally shown here too. Interest paid is normally shown in operating activities, after cash generated from operations (IAS 7 permits operating or financing). Dividends paid are normally shown in financing activities. Follow the question if it tells you to classify these items differently.

The key point is that the statement shows cash, not accounting entries. Depreciation is not cash. A profit or loss on disposal is not cash. A purchase on credit or by finance lease is not a cash payment at the time. So you cannot read the figure straight from the statement of financial position. You must rebuild it.

The tool is the non-current asset working. You start with the opening carrying amount, add revaluation increases, deduct depreciation and the carrying amount of disposals, and compare the result with the closing carrying amount. The missing figure is the additions. If all additions were paid for in cash, that is your cash paid for PPE.

Disposals link to the statement of profit or loss. The proceeds equal the carrying amount of the asset sold plus any profit, or minus any loss. In the operating section, the profit on disposal is deducted (or the loss added back) so that the full proceeds appear only once, in investing.

Key formulas to remember

PPE carrying amount working: Opening carrying amount + additions + revaluation increase − depreciation − carrying amount of disposals = Closing carrying amount; Use the working to find the missing figure, usually additions. Use carrying amounts, not cost, unless you build separate cost and depreciation accounts.
Cash paid for PPE: Additions (from working) − increase in payables for assets (or + decrease) − non-cash additions such as finance leases; If the question gives no such adjustments, additions equal cash paid.
Carrying amount of disposal: Cost − accumulated depreciation at the date of sale; Needed to find proceeds.
Disposal proceeds: Carrying amount of disposal + profit on disposal (or − loss on disposal); Proceeds are a cash inflow in investing activities.
Interest and dividends received: Income in profit or loss + opening receivable − closing receivable; If no receivables are given, cash received equals the income reported.
Net cash from investing activities: Proceeds from disposals + interest received + dividends received − purchases of PPE and intangibles − purchases of investments; A negative total is normal for a growing business.

How to solve Cash Flows from Investing Activities questions

Use the same sequence for any investing activities question. Keep working in brackets for outflows.

1Read the question and note what the statement needs: PPE only, or also intangibles and investments, and whether interest and dividends received are included in investing.
2Set up the PPE carrying amount working with opening and closing balances from the statements of financial position.
3Insert known items: depreciation charge, revaluation increase, and the carrying amount of disposals. Find the disposal carrying amount from cost less accumulated depreciation if needed.
4Find the balancing figure. This is the additions to PPE.
5Adjust additions for non-cash items such as assets acquired under finance leases or unpaid amounts for assets, to reach cash paid for PPE.
6Calculate disposal proceeds: carrying amount plus profit or minus loss on disposal.
7Calculate interest received and dividends received, adjusting for receivables if given.
8List all items with outflows in brackets and total the net cash from or used in investing activities.

Quickest way: The T-account balancing method

When to use it: Use when the question gives opening and closing PPE, depreciation and a disposal, and you have little time for a full working.

Draw a PPE T-account using carrying amounts. Put opening balance and revaluation on the debit side.
On the credit side, put depreciation and the carrying amount of disposals, then closing balance.
The debit side balancing figure is additions.
Compare with any information on leases or payables and adjust.
For disposals, write: carrying amount ± profit or loss = proceeds. Do it in one line.
Do not recompute the whole statement. Insert the figures into the investing section only.

Common mistakes in Cash Flows from Investing Activities

Taking the difference between opening and closing PPE as cash paid.
It looks like the quick answer, but ignores depreciation and disposals.
Fix: Always build the working. Depreciation reduces PPE without any cash and disposals reduce it too.
Showing the profit on disposal as the cash inflow.
Students confuse the profit in profit or loss with cash received.
Fix: Proceeds equal carrying amount plus profit or minus loss. Deduct the profit in the operating section.
Using the cost of the disposed asset instead of its carrying amount.
The question gives cost and accumulated depreciation separately and students stop at cost.
Fix: Subtract accumulated depreciation first to get carrying amount, then adjust for profit or loss.
Forgetting a revaluation surplus in the PPE working.
The surplus sits in equity and its link to PPE is overlooked.
Fix: Check the revaluation reserve movement. An increase is a non-cash addition to PPE and goes in the working.
Ignoring assets acquired on finance leases or unpaid at year end.
Students treat all additions as cash.
Fix: Remove non-cash additions from the total. Only the cash actually paid goes in investing.
Showing outflows as positive numbers.
Rushing and forgetting the sign convention.
Fix: Put purchases in brackets and inflows without brackets, then check the total makes sense.

Worked examples

Example 1

A company's PPE had a carrying amount of $480,000 at 1 January and $560,000 at 31 December. Depreciation for the year was $70,000. An asset with a carrying amount of $40,000 was sold at a profit of $8,000. There were no revaluations and all additions were paid in cash. Calculate the cash paid for PPE and the disposal proceeds.

Show the solution

PPE working: opening 480,000 + additions − depreciation 70,000 − disposal 40,000 = closing 560,000.
Additions = 560,000 + 70,000 + 40,000 − 480,000 = 190,000.
Cash paid for PPE = $190,000 as there are no non-cash additions.
Proceeds = carrying amount 40,000 + profit 8,000 = 48,000.

Answer: Cash paid for PPE is $(190,000) and disposal proceeds are $48,000, a net investing outflow of $142,000 on these two items.

Example 2

For the year, a company reports PPE opening carrying amount $300,000, closing $350,000, depreciation $45,000, a revaluation increase of $20,000 and a disposal of an asset with cost $60,000 and accumulated depreciation $35,000, sold at a loss of $5,000. Additions include $30,000 acquired under a finance lease. Interest received in profit or loss was $6,000 and dividends received were $4,000, with no receivables. Calculate net cash from investing activities.

Show the solution

Disposal carrying amount = 60,000 − 35,000 = 25,000.
PPE working: 300,000 + additions + 20,000 − 45,000 − 25,000 = 350,000.
Additions = 350,000 − 300,000 − 20,000 + 45,000 + 25,000 = 100,000.
Cash paid = 100,000 − 30,000 finance lease = 70,000.
Proceeds = 25,000 − loss 5,000 = 20,000.
Net = (70,000) + 20,000 + 6,000 + 4,000 = (40,000).

Answer: Net cash used in investing activities is $(40,000).

Exam tips

Objective test questions often ask for a single number such as cash paid for PPE. Build the working on your scratch paper and read what is asked before you answer.
Check the question for finance leases, revaluations and payables for assets. These are the usual traps that change the answer.
In multiple response questions about classification, remember interest and dividends received go in investing in this exam unless told otherwise. Interest paid is normally in operating activities and dividends paid in financing, unless the question specifies otherwise.
Estimate sense: if the business is growing and has bought assets, net investing is usually negative. A positive total deserves a recheck.
Work with the carrying amount unless the question gives a cost and depreciation split, which saves time.

Practice questions from Statement of cash flows (excluding partnerships)

Cash Flows from Investing Activities in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Cash Flows from Investing Activities: frequently asked questions

How do I calculate purchase of PPE in a cash flow statement?

Build a carrying amount working: opening balance plus additions plus revaluation minus depreciation minus disposals equals closing balance. The balancing figure is additions. Adjust for any non-cash additions, such as finance leases, to get cash paid.

How do I find proceeds from disposal of non-current assets?

Take the carrying amount of the asset sold, which is cost less accumulated depreciation. Add any profit on disposal or subtract any loss. The result is the cash received, shown as an inflow in investing activities.

Are interest and dividends received investing activities?

In the ACCA FA exam they are normally shown in investing activities. If the question has receivables for interest or dividends, adjust the income for the change in the receivable to find cash received.

Why is depreciation not in the investing section?

Depreciation is a non-cash charge. It is added back in the operating section and only used in the PPE working to find the additions.