Question

Purchase of land using a cheque is classified as: (Cash Flow Statement question)

• A. Operating Activity
• B. Investing Activity
• C. Financing Activity
• D. Non-Cash Activity

Hint:

Investing activities involve the purchase and sale of long-term assets. Any payment for acquiring assets such as land is classified as an investing activity in the cash flow statement.

Answer 1

The Correct Option is B

Acquiring land constitutes an investing activity. The cash flow statement categorizes investing activities to encompass the procurement and sale of long-term assets, including land, structures, and machinery. The use of a cheque signifies a cash outflow linked to an investment in long-term assets.
Consequently, the purchase of land via cheque is categorized under Investing Activity.