Final answer:
Cash disbursed for the acquisition of a capital asset is subtracted in the Investing Activities section of the statement of cash flows, as it reflects an investment in long-term assets.
Step-by-step explanation:
Under the indirect method of preparing a statement of cash flows, cash disbursed for the acquisition of a capital asset is subtracted in the Investing Activities section. The statement of cash flows is divided into three sections: Operating Activities, Investing Activities, and Financing Activities. The acquisition of capital assets is considered an investment in the business; thus, it is categorized under Investing Activities. When a company purchases a capital asset, such as machinery, buildings, or equipment, it uses cash, which results in an outflow in the Investing Activities section. This cash outflow does not occur in the daily operations of the business, nor does it relate to the financing of the business; therefore, it is not included under Operating or Financing Activities.