Question

Which of the following statements is incorrect regarding the investing activities section of the statement of cash flows?

Multiple Choice

• a. Investing activities deal with long-term liabilities (debt) and equity accounts.

• b. Increases in long-term asset balances suggest cash outflows to purchase assets.

• c. Decreases in long-term asset balances suggest cash inflows from selling assets.

• d. Investing activities involve cash purchases and cash disposals of long-term assets.

Answer 1

Solution:

Cash Flow from investing activities is show the details of cash inflow and outflow from Fixed assets purchase, disposal and long term investments.

When there increases in long term assets balance than it means cash outflow from purchase assets

And when there is decreases in long term assets than it means there is sale of long term assets

So as per above explanation Option B, C & D are correct for cash flow from investing activities

But investing activities deal with long term liabilities (debt) and equity account are deal with cash flow from financing activities so it means option A is not a part of cash flow from investing.

Answer = Option A