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Hello. I have a question about cash flow statement (indirect method). Purchase or sale of non current assets are included investing activity. Gross amount (ex: proceed amount) is recorded in this section. But how we sure that it’s all cash sale? May be some assets are sold with credit. So why total proceed amount is included investing activity? Thanks in advance.
It doesn’t matter whether the sale is on cash or on credit.
Obviously cash will be received at some stage. If the sale is on credit then there will be a receivable and changes in receivables are dealt with in the changes to working capital adjustment to the operating income.
I understood, thank u very much. Another question about cash flow statement. If company take a loan (current). This short term loan is treated in the same way as non-current loan?
And second question: I know if company take a loan it’s financing activity. But if the company made a loan to another company, interest received relating to this loan is included investing activity or operating activity. How about the loan? It’s included financing activity or investing activity?As I explain in my free lectures, short-term borrowings would be included in the total cash balances (as a negative balance). However in the exam loans are always assumed to be long-term unless specifically told differently.
A loan to another company would be treated as an investing activity (but these do not really happen in Paper FA).
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