FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Concept explainers

Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows fro…
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the …
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It…
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expect…
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Question

Classification of Cash Flows Related to the Cost of Financing. Under U.S. GAAP, the statement of cash flows classifies cash expenditures for interest expense on debt as an operating activity but classifies cash expenditures for dividends to shareholders as a financing activity. Justify this apparent paradox.

Please explain without copying from another source.

 
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Generally Accepted Accounting Principles (GAAP): Generally Accepted Accounting Principles are the generally followed rules, concepts and principles which are used for the presentation of the financial information of a business organization.

 

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