If an entity receives cash from the issuance of long-term debt during a year and also pays out cash to reduce a long-term debt, both a cash inflow and a cash outflow will be reported in the financing activities section of the cash flow statement.

Question

Quizplus · Accepted Answer

Both events involve long-term debt and they are classified under financing activities section of the cash flow statement. The inflow of cash from issuing long-term debt is a financing activity that increases the entity's liabilities, while the outflow of cash to reduce long-term debt is also a financing activity that decreases the entity's liabilities.

If an Entity Receives Cash from the Issuance of Long-Term