When fixed assets are bought on hire purchase, the interest element is classified under ______, and the loan element is classified under _____.
Answer & explanation
Correct answer: option 3
It is important to mention here that a transaction may include cash flows that are classified differently. For example, when the instalment paid in respect of a fixed asset acquired on deferred payment basis includes both interest and loan, the interest element is classified under financing activities and the loan element is classified under investing activities.