Question

3. When an installment paid in respect of a fixed asset acquired on a deferred payment basis includes both interest and loan, why is the interest element classified under financing activities and the loan element classified under investing activities?

Answer 1

The financing activities includes Cash flow from financing (CFF)activities is a category in a company's cash flow statement that accounts for external activities that allow a firm to raise capital. In addition to raising capital, financing activities also include repaying investors, adding or changing loans, or issuing more stock.(so the interest elements classified under financing activities)
The investing activities includes Cash flow from investing activities is an item on the cash flow statement that reports the aggregate change in a company's cash position resulting from investment gains or losses and changes resulting from amounts spent on investments in capital assets, such as plant and equipment.(so the loan elements classified under investing activities)

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