Proceeds from the sale of motor vehicles will be included in the statement of cash flows as:a cash activity.an operating activityan investing activity.a financing activity.
Question
Proceeds from the sale of motor vehicles will be included in the statement of cash flows as:a cash activity.an operating activityan investing activity.a financing activity.
Solution
Proceeds from the sale of motor vehicles will be included in the statement of cash flows as:
- An investing activity.
Investing activities in a cash flow statement refer to the changes in a company's investments and long-term assets, which include property, plant, and equipment. When a company sells a motor vehicle, it is essentially selling a long-term asset. Therefore, the proceeds from the sale would be classified as a cash inflow from investing activities.
Operating activities relate to the company's core business operations, such as selling goods or services, whereas financing activities relate to how a company raises capital and pays back its investors (e.g., issuing and repaying debt, issuing and repurchasing shares, and paying dividends). The sale of a motor vehicle does not fall into these categories.
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