Question

A non-governmental, not-for-profit organization borrowed $5,000, which it used to purchase a truck.

In which section of the organization's statement of cash flows should the transaction be reported?

A. In cash inflow and cash outflow from investing activities
B. In cash inflow and cash outflow from financing activities
C. In cash inflow from financing activities and cash outflow from investing activities
D. In cash inflow from operating activities and cash outflow from investing activities

Answer 1

C. In cash inflow from financing activities and cash outflow from investing activities

Step-by-step explanation:

Investing activities: it records activities that include buying and selling long-term assets. Purchasing is a cash outflow, whereas selling is an inflow of cash.

Financing activities: It tracks transactions that have an effect on long-term debt and total stockholder equity balance. Issuance of equity is cash inflow, while redemption and dividend is a cash outflow.

In the given case, the amount is borrowed which reflect the debt and the debt comes under the financing activities

And, the amount is borrowed to purchase a truck which shown in the investing activity as it deals with the purchase and sale of long term assets