A not-for-profit voluntary health and welfare organization should report a contribution for the construction of a new building as cash flows from which of the following in the statement of cash flows?
a.Financing activities.
b.Operating activities.
c.Capital financing activities.
d.Investing activities.
Answer:A
Choice "A" is correct. Cash received with donor-imposed restriction limiting its use to long-term purposes (such as construction of a new building) is displayed as a financing activity on the statement of cash flows of a not-for-profit organization.
Choice "b" is incorrect. Cash received with donor imposed restrictions limiting its use to long term purposes is a financing activity, not an operating activity, on the statement of cash flows of a not-for-profit organization. Operating activities include cash received for unrestricted purposes or used in the central ongoing activities of the organization.
Choice "c" is incorrect. This is a distracter. There is no classification in the statement of cash flows used for not for profit organizations entitled "Capital financing activities." This classification is used in the statement of cash flows prepared for a proprietary fund of a government.
Choice "d" is incorrect. Cash received with donor imposed restrictions limiting its use to long term purposes is a financing activity, not an investing activity, on the statement of cash flows of a not-for-profit organization. Investing activities include sources of cash from the sale of long lived assets or uses of cash associated with the acquisition of long lived assets.