Intermediate Accounting (16th Edition)

Published by Wiley
ISBN 10: 1118743202
ISBN 13: 978-1-11874-320-1

Chapter 5 - Balance Sheet and Statement of Cash Flows - Review and Practice - Questions - Page 238: 24


For starters, operating activities incorporates the cash effects of transactions that normally enter into the determination of net income. Investing activities on the other hand incorporate making as well collecting loans, acquiring and disposing of debt and equity instruments i.e. property, land, equipment and intangibles. Lastly, financing activities include the long-term liabilities as well the stockholders' equity items and they incorporate obtaining capital from owners as well providing them with a return on (dividends) and a return of their investment and borrowing money from creditors as well repaying the amounts borrowed.

Work Step by Step

Additionally, investing activities can be viewed to as the earnings or expenditures on long-term assets inclusive of equipment and facilities, financing activities on the other hand allude to the cash flows between an entity and its owners as well creditors from activities such as issuing bonds, selling and buying stocks. Operating activities can be viewed to as those functions of a business that are normally directly related to providing its goods and services to the market.
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