Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Cash Flow Statement

Question:

Where will the purchase of goodwill be shown in Cash Flow Statement of a company?

Options:

Cash Flow from Operating Activities

Cash Flow from Investing Activities

Cash Flow from Financing Activities

Cash Equivalents

Correct Answer:

Cash Flow from Investing Activities

Explanation:

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 advances and loans extended to third parties (except when advanced by a financial entity as part of its operating activities).
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.