Question

Classification of Cash Flows The following are several transactions and events that might be disclosed on a company's statement of cash flows: Required: 1. Identify in which section (if any) of the statement of cash flows each of the preceding items would appear and indicate whether it would be an inflow (addition) or outflow (subtraction). a. issuance of common stock b. purchase of building c. net income d. increase in accounts receivable e. depreciation expense f. sale of land at cost g. conversion of bonds to common stock h. increase in accounts payable i. payment of cash dividends j. issuance of a stock dividend 2. Under IFRS, how may the payment of cash dividends be classified? As a net cash inflow from operating activities. As a net cash outflow from investing activities. As a net cash inflow from investing activities or operating activities. As a net cash outflow from financing activities or operating activities

Answer 1

Solution 1:

Classification of transaction in Cash Flow statement
S. No	Transaction	Section of Cash flow statement	Inflow / Outflow
a	issuance of common stock	Cash flow from financing activities	Inflow
b	purchase of building	Cash flow from Investing activities	Outflow
c	net income	Cash flow from Operating activities	Inflow
d	increase in accounts receivable	Cash flow from Operating activities	Outflow
e	depreciation expense	Cash flow from Operating activities	Inflow
f	sale of land at cost	Cash flow from Investing activities	Inflow
g	conversion of bonds to common stock	Non-Cash Investing and Financing Activities	NA
h	increase in accounts payable	Cash flow from Operating activities	Inflow
i	payment of cash dividends	Cash flow from financing activities	Outflow
j	issuance of a stock dividend	Non-Cash Investing and Financing Activities	NA

Solution 2:

Under IFRS, payment of cash dividends can be classified as a net cash outflow from financing activities or operating activities.