[Anonymous]

Here below in the notes, investing activities include “disposing of debt”, and financing activities include “repaying debt”. So if you issue bond and then retire the bond, is that financing or investing, or both?

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Investing activities is one of the three categories of cash flows in the statement of cash flows. The category includes all transactions related to the making or collecting of loans and the acquiring and disposing of debt; equity instruments (of other entities); property, plant, and equipment; or a business unit. FASB ASC 230-10-20

Financing activities is one of the three categories of cash flows on the statement of cash flows. It includes all transactions related to obtaining resources from owners and providing them with a return on, and a return of, their investment and to obtaining and repaying debt, including short-term and long-term debt, mortgages, capital lease obligations, seller-financed debt, and debt incurred to acquire treasury stock. (FASB ASC 230-10-20)

[Anonymous]

Anyone?

[Anonymous]

In the investing section is it referring to investing and disposing of debt *instruments* i.e. buying bonds versus financing section obtaining debt meaning taking out a loan?

[Anonymous]

So if you issued a 1000 bond and now it matures and you have to pay the 1000 principal to the person you issued it to, would that be investing or financing?

[Fanalyst]

That would be financing. On the other hand, if you were the person that held the 1,000 bond (instrument) and were the one supposed to receive the 1000 principal repayment, but instead sold the instrument to someone else, that would be an investing activity.

[Anonymous]

Do you know how trading & AFS securities can be either equity instruments or debt instruments? The debt instrument here is investing. Same thing goes for held-to-maturity (debt).

When you are the loaner, it's financing.

When you are the investor, it's investing.

[Anonymous]

All right, revised chart. Is this correct?

-Paying interest: operating activity

-Paying dividends: financing activity

-Receiving interest and dividends: operating activity

-Issuing stock and bonds and paying bond principal: financing activity

-Buying stock and bonds and receiving bond principal: investing activity

[okcpa2015]

I just breakdown the accounting equation:

Current Asset (Operating) + Long-Term Assets (Investing) = Current Liabilities (Operating) + Long-Term Liabilities (Financing) + Equity (Financing)

If given a transaction just determine the effect to the balance sheet (do the JE if you have too). Easiest way to remember cash flows.

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[Anonymous]

Yes

[Author]

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