What is Classification of cash flows?
In short
Under US accounting standards, interest paid, interest received, dividends received and income taxes paid are operating cash flows, while dividends paid are financing cash flows.
Key takeaways
- Cash flows from trading securities are classified by the purpose for which they were bought.
- Repaying the principal of debt is financing; the interest is operating.
- International standards allow more choice for interest and dividends.
Where it's tested
FAR: Statement of Cash Flows — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Net income is $150,000. Depreciation expense was $30,000, there was a $10,000 gain on sale of equipment, accounts receivable increased $20,000, and accounts payable increased $15,000. What is net cash provided by operating activities under the indirect method?