Classify each transaction as an operating, an investing, or a financing activity.
Classifying Business Transactions
Bob Jacobs opened an advertising agency. The following transactions occurred during January of the current year. Classify each transaction as an operating, an investing, or a financing activity.
| a. | Invested cash in the business, $5,000. | |
| b. | Purchased office equipment. Paid $2,500 cash and agreed to pay the balance of $2,000 in four monthly installments. |
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| c. | Paid office rent, $400. | |
| d. | Received cash for services rendered, $700. | |
| e. | Paid phone bill, $95. | |
| f. | Received cash for services rendered, $600. | |
| g. | Made payment on loan in transaction (b), $500. | |
| h. | Paid wages to part-time employee, $800. | |
| i. | Paid electricity bill, $100. | |
| j. | Withdrew cash for personal use, $500. | |
| k. | Paid wages to part-time employee, $600. |
IAS -7 classifies cash flow into three different types
a) Cash flow from operating activities
These include ordinary revenue-generating activities and production activities
b) Cash flow from investing activities
These include acquisition and disposal of long term assets , investment in securities etc
c) Cash flow from Financing activities
Cash flow from financing activities include changes in equity and debt of the entity that is funding for the entities operations.
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