Cash Flow Statement Page 12

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MODULE - 6A
Cash Flow Statement
Analysis of Financial Statements
Step - II
Investing Activities
Investing Activities refer to transactions that affect the purchase and sale
Notes
of fixed or long term assets and investments.
Examples of cash flow arising from Investing activities are
1. Cash payments to acquire fixed Assets
2. Cash receipts from disposal of fixed assets
3. Cash payments to acquire shares, or debenture investment.
4. Cash receipts from the repayment of advances and loans made to third
parties.
Thus, Cash inflow from investing activities are
– Cash sale of plant and machinery, land and Building, furniture, goodwill
etc.
– Cash sale of investments made in the shares and debentures of other
companies
– Cash receipts from collecting the Principal amount of loans made to
third parties.
Cash outflow from investing activities are :
– Purchase of fixed assets i.e. land, Building, furniture, machinery etc.
– Purchase of Intangible assets i.e. goodwill, trade mark etc.
– Purchase of shares and debentures
– Purchase of Government Bonds
– Loan made to third parties
Illustration 2
From the following information calculate the cash flow from investing
activities
Particulars
Opening
Closing
Machinery (at cost)
400,000
420,000
Accumulated Depreciation
100,000
110,000
Patents
280,000
160,000
73
ACCOUNTANCY

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