Question

Question: What accounts on the balance sheet must be evaluated when completing the financing activities section of the statement of cash flows?

Short answer

Answer

Financing activity records transactions related to long-term liabilities and equity.

Step-by-step solution

Evaluating T-accounts of long-term liabilities 

While computing cash generated from or used for financing activitiesit is important to evaluate the T-accounts of each long-term liability. Opening and closing balances of each long-term liability can be directly picked up from the balance sheet

Evaluating T-accounts of equity 

Issuance of new common stock, Buy-back of existing common stock, dividend paid, etc. are a few examples of transactions that should be recorded while computing cash flow from financing activity.