Question

In a local NFP elementary school’s statement of cash flows, a contribution restricted for use on a new building project would be reported as:_________.A. A capital and related financing activity. B. A financing activity. C. An investing activity. D. An operating activity.

Answer 1

Answer: B. A financing activity.

Step-by-step explanation:

A Financing activity is one that involves the provision of capital to the company or project being built which is why long term liabilities and equity will fall under this category.

This contribution that has been earmarked for use on the construction of a new building will therefore be treated as a financing activity because it represents capital being provided for the elementary school.

Had it been the Elementary school providing the funds itself then this would have been an Investing activity.