CIMA Financial Reporting (F1) Practice Exam

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What are the three main headings the cash flow statement groups cash flows under?

Cash flow from financing activities; cash flow from investing activities; cash flow from operating activities

Revenue, expenses and net income

Cash flow from operating activities; cash flow from investing activities; cash flow from financing activities

The main concept here is how a cash flow statement organizes cash movements. The three categories are cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. This structure, prescribed by IAS 7, separates cash generated by the core business from cash used for investing in assets and from cash raised or repaid to finance the business. The reason this option is best is that it uses the standard phrasing with cash flows (plural) and presents the categories in the conventional order: operating, investing, financing. The other choices don’t fit because they refer to income statement items or use nonstandard wording/order.

Asset categories and equity movements