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ACCA Applied Knowledge · Financial Accounting · Statement of cash flows (excluding partnerships)

Under IAS 7 Statement of Cash Flows, which of the following is classified as a cash flow from financing activities?

Proceeds from issuing ordinary shares are a financing cash flow because they change the entity's equity capital. Receipts from customers and payments to suppliers are operating activities, while buying plant and equipment is an investing activity under IAS 7.

  1. ACash received from customers for goods sold
  2. BProceeds from issuing ordinary shares for cashCorrect
  3. CCash paid to purchase plant and equipment
  4. DCash paid to suppliers for inventory

Explanation

Financing activities result in changes in the size and composition of equity capital and borrowings. Proceeds from a share issue are therefore financing. Customer receipts and supplier payments are operating, and purchase of plant is investing.

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