* Decrease in Goodwill A/c- Non-cash expenses are expenses that are recorded on a company's income statement but do not involve the actual outflow of cash during the period in which they are recognized. These expenses are added back to net income when preparing the cash flow statement because they do not represent a cash expense Depreciation, amortization, depletion etc are non cash expenses. Thus, Decrease in goodwill account does not involve any amount of cash.
* Dividend paid- Financing activities center around the management of long-term funds or capital within an enterprise. These activities involve actions such as acquiring or repaying capital and borrowings. These financial activities can significantly impact the size and structure of the owners' capital and liabilities.
Cash Inflows from Financing Activities:
* Receipt of cash resulting from the issuance of equity shares.
* Receipt of cash from issuing debentures, loans, bonds, and other short or long-term borrowings.
Cash Outflows from Financing Activities:
* Cash repayments made to settle borrowed amounts.
* Cash payments of interest on debentures and long-term loans.
* Cash dividends distributed on both equity and preference capital.
Thus, dividend paid is a financing activity.
* Rent received- The distinct presentation of cash flows from investing activities holds significance as it provides insights into the allocation of resources aimed at generating future income and cash inflows.
Examples of cash flows stemming from investing activities encompass:
Cash Outflows from Investing Activities:
* Cash payments directed towards acquiring fixed assets, including intangible assets and capitalized research and development.
* Cash payments made to procure shares, warrants, or debt instruments of other entities, excluding instruments held for trading objectives.
Cash Inflows from Investing Activities:
* Cash receipts resulting from the disposal of fixed assets, including intangibles.
* Cash receipts arising from the repayment of advances or loans extended to external parties (excluding cases involving financial entities).
* Cash receipts originating from the sale of shares, warrants, or debt instruments of other entities, except those held for trading purposes.
* Interest received in cash from loans and advances.
* Dividends received from investments in other entities.
Thus, rent received is a investing activity.
* Purchase of machine for trading purpose- Cash flows from operating activities primarily stem from the core operations of the business. They mainly arise from transactions and events that contribute to the determination of net profit or loss.
Examples of cash flows from operating activities encompass:
Cash Inflows from Operating Activities:
* Cash received from the sale of products and provision of services.
* Cash received from royalties, fees, commissions, and other sources of income.
Cash Outflows from Operating Activities:
* Cash disbursed to suppliers for acquiring goods and availing services.
* Cash disbursed to employees and on their behalf.
* Cash payments to an insurance company for premiums, claims, annuities, and related policy benefits.
* Cash payments for income taxes, unless these payments can be specifically attributed to financing or investing activities.
Thus, Purchase of machine for trading purpose is a operating activity. |
