Question

Purchase of land using a cheque is classified as: (Cash Flow Statement question)

• A. Operating Activity
• B. Investing Activity
• C. Financing Activity
• D. Non-Cash Activity

Hint:

Investing activities involve the purchase and sale of long-term assets. Any payment for acquiring assets such as land is classified as an investing activity in the cash flow statement.

Answer 1

The Correct Option is B

The purchase of land is considered an investing activity. According to the cash flow statement classification, investing activities include the acquisition and disposal of long-term assets, such as land, buildings, and equipment. Since a cheque is being used, it is a cash outflow associated with an investment in long-term assets.
Thus, the purchase of land using a cheque is classified under Investing Activity.