Where are treasury bills shown in cash flow statement? why?

Question

Answer

The exchange of common stock for an investment in Plumlee is reported as a 'noncash investing and financing actvity.' It is shown as flows: The purchase of treasury stock is reported as a cash payment in the financing actvities of the statement of cash flows. Hope its clear..

Answer

It will recorded in financing,because it is a part of short term investment

Answer

Treasury bills are cash and cash equivalent

Answer

Introduction:

Treasury bills are short-term debt instruments issued by the government to raise funds. These bills are generally issued for a maturity period of less than one year. The cash flow statement provides information about the cash inflows and outflows of a company during a specific period. It helps in analyzing the liquidity position and cash flow management of the company.

Operating Activities:

Treasury bills are typically classified as cash equivalents and are included in the operating activities section of the cash flow statement. The operating activities section shows the cash flows from the company's primary business operations. Treasury bills are considered highly liquid and can be easily converted into cash, making them similar to cash and cash equivalents.

Key Points:
- Treasury bills are shown in the operating activities section of the cash flow statement.
- They are classified as cash equivalents.
- Treasury bills are highly liquid and can be easily converted into cash.

Reasons for showing treasury bills in the cash flow statement:

1. Cash Flow Management:
- Including treasury bills in the cash flow statement helps in assessing the company's cash flow management.
- It provides insights into the company's ability to generate and utilize cash from its operating activities.
- The cash flow statement helps in monitoring the company's liquidity position and its ability to meet short-term obligations.

2. Transparency and Disclosure:
- Showing treasury bills in the cash flow statement enhances transparency and provides useful information to investors, analysts, and other stakeholders.
- Investors can evaluate the company's cash flow generation capacity and assess its ability to generate returns from its operating activities.

3. Cash Equivalents:
- Treasury bills are considered cash equivalents due to their high liquidity and short-term nature.
- Including them in the operating activities section reflects their close resemblance to cash and their ability to be readily converted into cash.

4. Regulatory Compliance:
- The presentation of treasury bills in the cash flow statement follows the guidelines and regulations set by accounting standards.
- These standards ensure consistent reporting and comparability among different companies.

Conclusion:

Treasury bills are included in the operating activities section of the cash flow statement as cash equivalents. This reflects their high liquidity and ability to be readily converted into cash. The inclusion of treasury bills in the cash flow statement provides insights into the company's cash flow management, enhances transparency, and ensures regulatory compliance. Overall, it helps stakeholders assess the company's liquidity position and its ability to generate cash from its core operations.

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