In order to assess an entity's cash performance it is common to classify its activities into operating, investing and financing. For the local cricket club which of the following would be a financing activity?
A) Paying for lawn mowing.
B) Renovating the clubhouse.
C) Paying the annual subscription to the cricket association.
D) Borrowing $40 000 from a bank.

Question

Quizplus · Accepted Answer

Borrowing money from a bank is a financing activity as it involves acquiring funds from external sources to finance the club's operations or investments. Paying for lawn mowing and paying the annual subscription to the cricket association are operating activities, while renovating the clubhouse is an investing activity.

In Order to Assess an Entity's Cash Performance It Is