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#cfa-level-1 #reading-23-financial-reporting-mechanics
Exhibit 1. Typical Business Activities and Financial Statement Elements Affected
Operating activities

  • Sales of goods and services to customers: (R)

  • Costs of providing the goods and services: (X)

  • Income tax expense: (X)

  • Holding short-term assets or incurring short-term liabilities directly related to operating activities: (A), (L)

Investing activities

  • Purchase or sale of assets, such as property, plant, and equipment: (A)

  • Purchase or sale of other entities’ equity and debt securities: (A)

Financing activities

  • Issuance or repurchase of the company’s own preferred or common stock: (E)

  • Issuance or repayment of debt: (L)

  • Payment of distributions (i.e., dividends to preferred or common stockholders): (E)

Accounting elements: Assets (A), Liabilities (L), Owners’ Equity (E), Revenue (R), and Expenses (X).

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2. THE CLASSIFICATION OF BUSINESS ACTIVITIES
ofits (and cash flow) come from its operating activities. Exhibit 1 provides examples of typical business activities and how these activities relate to the elements of financial statements described in the following section. <span>Exhibit 1. Typical Business Activities and Financial Statement Elements Affected Operating activities Sales of goods and services to customers: (R) Costs of providing the goods and services: (X) Income tax expense: (X) Holding short-term assets or incurring short-term liabilities directly related to operating activities: (A), (L) Investing activities Purchase or sale of assets, such as property, plant, and equipment: (A) Purchase or sale of other entities’ equity and debt securities: (A) Financing activities Issuance or repurchase of the company’s own preferred or common stock: (E) Issuance or repayment of debt: (L) Payment of distributions (i.e., dividends to preferred or common stockholders): (E) Accounting elements: Assets (A), Liabilities (L), Owners’ Equity (E), Revenue (R), and Expenses (X). Not all transactions fit neatly in this framework for purposes of financial statement presentation. For example, interest received by a bank on one of its loans


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