[startupcfo]

If you do a capital lease, where does the principal go to? Cashflow from Investment Activities or Cashflow from Financing Activities (what book says)?

I was under the impression that CF from investing activity always includes purchases of investments or depreciable Property Plant and Equipment. So if you’re signing a lease to take on small chunks of a new machine every year in the form of a lease, why is it Cashflow from Financing? I thought CFF was reserved for investor activity through bonds and sale of stock

BEC - 87 | 02/28
REG - 70 | 06/10, REMATCH | 08/30
AUD - XX | 09/10
FAR - XX | 12/10

[Anonymous]

Because acquiring the asset was a non-cash transaction. The non-cash investing aspect of the transaction is disclosed in a note; there's nothing to account for on the Statement of Cashflows.
As the actual cash payment goes out, principal goes to the financing section and interest goes to the operating section.

[Author]

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