Statement of Cash Flows and the "explain in detail" (every paper, Q3)
Complete two activity sections, then explain one transaction's treatment and its effect on the closing bank balance.
The explain-in-detail formula
Name the activity section the item belongs in, and why (operating / investing / financing).
State the direction and amount — inflow or outflow, with the figure.
State the NET impact on the closing bank balance, using the figures.
If two transactions are compared, net them and say which dominates.
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Shares held vs shares issued
Selling shares the company holds in ANOTHER company is an investing inflow. Issuing or repurchasing the company's OWN shares is financing. A 2025 paper put both in the same question precisely to separate these. Real paper — 2025 Selling shares in another company vs repurchasing its own Fauro Limited sold shares it held in Mainfreight Limited for a $4 000 gain on top of their 5 000 carrying amount. On the same day it used some of that cash to repurchase 25 000 of its own shares at $2.20 each. Selling the Mainfreight shares: 5 000 + $4 000 gain = 9 000 INVESTING inflow — Fauro Limited is disposing of an asset it owns. Repurchasing its own 25 000 shares: 25 000 × $2.20 = $55 000 FINANCING outflow — a transaction with Fauro Limited's own shareholders. Net impact on the closing bank balance: 9 000 in, $55 000 out = a net outflow of $36 000, even though the overall bank balance for the year increased from other activity. ✓ 9 000 investing inflow vs $55 000 financing outflow — net $36 000 outflow from these two transactions specifically. Real paper — 2023 A tractor traded in against a new one A new tractor cost $90 000. The old tractor (carrying amount $20 000) was traded in for an allowance of 8 000 (a $2 000 loss on trade-in). Only the CASH actually paid is a cash flow: $90 000 cost − 8 000 trade-in allowance = $72 000. The 8 000 trade-in allowance never touched the bank account, so it is excluded entirely — it is a non-cash amount. The $72 000 is reported as an investing OUTFLOW, decreasing net cash from investing activities and the closing bank balance. ✓ $72 000 investing outflow — the full $90 000 cost would overstate the cash that actually left the business.