When a Company Purchases a Security It Considers a Cash

question 128

Multiple Choice

When a company purchases a security it considers a cash equivalent, the cash outflow is:

• A) Reported as an operating activity.
• B) Reported as an investing activity.
• C) Reported as a financing activity.
• D) Not reported on a statement of cash flows.

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Definitions:

Expense Account

An account that tracks the costs incurred by a company in the process of earning revenue.

Liability Account

An accounting record that captures the amounts owed by a business to others, representing its debts or obligations.

Double-Entry System

An accounting system that records each transaction twice, as debits in one account and credits in another, to ensure the accounting equation remains balanced.

Accounting Equation

The fundamental equation stating that Assets = Liabilities + Equity, which is the basis of the double-entry bookkeeping system.