What is an example of an item listed in the cash flow statement?

What is an example of an item listed in the cash flow statement?

• A. The sale of equipment
• B. Revenue from services
• C. Net income
• D. Change in equity

Answer: (A)

The sale of equipment is an example of an item listed in the cash flow statement because it represents a cash inflow or outflow during a specific period. The cash flow statement is designed to illustrate how cash enters and leaves a business, categorized into operating, investing, and financing activities. When equipment is sold, it typically generates cash, and this transaction is recorded under investing activities in the cash flow statement. This shows investors and stakeholders how effectively the company is managing its investments in long-term assets. The other items mentioned, while related to financial activity, fit into different categories of financial statements or are more reflective of operational metrics, rather than direct cash flows. Revenue from services is recognized on the income statement, net income is a result of revenue and expenses calculated on the income statement, and changes in equity are captured on the statement of changes in equity. Thus, the sale of equipment specifically aligns with the cash flow statement's objective of tracking actual cash movements.

The sale of equipment is an example of an item listed in the cash flow statement because it represents a cash inflow or outflow during a specific period. The cash flow statement is designed to illustrate how cash enters and leaves a business, categorized into operating, investing, and financing activities.

When equipment is sold, it typically generates cash, and this transaction is recorded under investing activities in the cash flow statement. This shows investors and stakeholders how effectively the company is managing its investments in long-term assets.

The other items mentioned, while related to financial activity, fit into different categories of financial statements or are more reflective of operational metrics, rather than direct cash flows. Revenue from services is recognized on the income statement, net income is a result of revenue and expenses calculated on the income statement, and changes in equity are captured on the statement of changes in equity. Thus, the sale of equipment specifically aligns with the cash flow statement's objective of tracking actual cash movements.