Hi sir, this is a question about cash flow statement
In the example 1 in the lecture, under the heading of ‘Cash flows from investing activities’, we add sale and subtract purchase of non-current assets, but what if we receive or pay on credit? Is it because it didn’t say in the question that non-current assets were sold or bought ‘on credit’, we then treated them as receipt or payment of cash by default?
Thank you so much!!!
As per the accounting standard, we show the total amount of the purchase (or sale) regardless as to whether or not it was on credit.
(Obviously it may be that the whole purchase price had not been paid during the period and that therefore some or all of the amount remains as a payable. However we still show the whole amount under investing activities, and any payable is dealt with in the movement on payables when calculating the cash flow from operating activities).
Hi sir, I see. Thank you so much!
You are welcome 🙂
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