Practicing Success
'Rent received by a company whose main business is manufacturing' comes under which type of activity while making a cash flow statement? |
Operating activity Investing activity Financing activity None of these |
Investing activity |
The correct answer is option 2- Investing activity. 'Rent received by a company whose main business is manufacturing' comes under investing activity while making a cash flow statement as rent is received on the property which is a investment of the company. Cash from Investing Activities- Investing activities are the acquisition and disposal of long-term assets and other investments not included in cash equivalents. Investing activities relate to purchase and sale of long-term assets or fixed assets such as machinery, furniture, land and building, etc. Transactions related to long term investment are also investing activities. Separate disclosure of cash flows from investing activities is important because they represent the extent to which expenditures have been made for resources intended to generate future income and cash flows. |