Under IAS 7, cash received from issuing ordinary shares is normally classified as which type of cash flow?
Correct answer: C. Financing activity
- A. Operating activity
- B. Investing activity
- C. Financing activity
- D. Non-cash activity
Explanation
Issuing shares changes the entity's equity financing and creates a cash inflow from owners. It is therefore classified as a financing activity, not an operating or investing activity.
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Financial statements present a business's financial performance and position through the income statement, statement of financial position, cash flow statement and changes in equity. Questions involve preparing and interpreting these statements, adjusting entries, depreciation, closing inventory, accrued and prepaid items, and distinguishing profit from cash flow.
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