ACCA Applied Knowledge · Financial Accounting · Statement of cash flows (excluding partnerships)
Under IAS 7, which of the following is classified as a cash flow from financing activities in the statement of cash flows of a manufacturing company?
Proceeds from issuing new ordinary shares are a financing cash flow, because financing activities cover cash raised from or repaid to owners and lenders. Receipts from customers and payments to suppliers are operating items, and buying plant is an investing activity.
- ACash received from customers for goods sold
- BProceeds from issuing new ordinary sharesCorrect
- CCash paid to purchase plant and equipment
- DCash paid to suppliers for raw materials
Explanation
Financing activities change the size and composition of equity capital and borrowings. Proceeds from a share issue is therefore a financing inflow. Customer receipts and supplier payments are operating, while purchase of plant is investing.
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