Section A

When preparing a Statement of Cash Flows in accordance with IAS 7, which TWO of the following items would be classified under 'Cash flows from investing activities'?

Answer options:

Proceeds from the issue of share capital.

Proceeds from the sale of equipment.

Dividends paid to shareholders.

Dividends received from an associate company.

How to approach this question

Recall the three categories: Operating (day-to-day), Investing (non-current assets and returns on investments), Financing (equity and long-term borrowings).

Full Answer

Investing activities include the cash flows arising from the purchase and sale of non-current assets (like equipment) and cash receipts from investments, such as dividends received. Issuing shares and paying dividends are financing activities.

Common mistakes

Confusing dividends paid (financing) with dividends received (investing/operating).

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Practice the full ACCA FA — Financial Accounting Practice Exam 5

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