Accounting Technician II Practice Test

Which item is a typical investing activity?

Interest received on investments. Payment of wages. Purchase of equipment. Proceeds from issuing shares.

Correct Answer:

Purchase of equipment.

Explanation:

Investing activities are cash flows tied to acquiring or disposing of long-term assets, like property, plant, and equipment. Purchasing equipment fits this category because it involves obtaining a non-current asset that will be used in the business for many years. Paying wages is part of the day-to-day operating activities of the business, not investing. Proceeds from issuing shares affect the company’s financing and its capital structure, not its asset base. Interest received can be classified differently in some frameworks, but it does not involve acquiring a long-term asset, so it isn’t the typical investing activity.

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