The primary focus of financing activities is to raise working capital necessary to be used in business operations. The owners invest to the entity and/or creditors lend capital to the entity.
The transactions involving financing activities and their effects in the cash flows are as follows:
A. Transactions which increases cash (cash receipts)
- Owner's investments
- Borrowings
B. Transactions which decreases cash (cash payments)
- Owner's drawings
- Payments of borrowings
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