## Investing Activities – AS 3

### Definition

Activities relating to acquisition and disposal of long-term assets and other investments not included in cash equivalents.

Think of it as: spending to build productive capacity or earn investment returns.

### Typical Inflows (Investing)

Sale of PPE (Property, Plant & Equipment)
Sale of Intangible Assets
Sale of Investment Property
Sale of shares / debentures / preference shares (investments held)
Repayment of loans/advances given to third parties
Interest income on loans given (for non-financial institutions)
Dividend income received (for non-financial institutions)
Rent income on investment property

### Typical Outflows (Investing)

Purchase of PPE, Intangibles, Investment Property
Purchase of investments in shares, debentures, preference shares
Loans/advances given to third parties

### Balance Sheet Mapping

Investing activities primarily link to the Non-Current Assets side of the balance sheet:

PPE, Intangibles, Investment Property, Long-term Investments, Loans Given.

Worked example

### Example 1

During the year: Purchased machinery ₹2,00,000; Sold old equipment ₹40,000; Gave loan to a supplier ₹50,000; Received back loan from supplier ₹30,000; Earned interest on loan ₹5,000 (non-financial company).

Cash Flow from Investing Activities:

Purchase of machinery −2,00,000

Sale of equipment +40,000

Loan given to supplier −50,000

Loan repaid by supplier +30,000

Interest received on loan +5,000

──────────────────────────────────────────

Net Investing Cash Flow −1,75,000

⚠️ Common exam mistakes

Including investments in cash equivalents (e.g., 3-month T-bills) under investing — these are CCE movements, not investing activities.
For a non-financial institution, forgetting to classify interest earned and dividend received as investing (not operating).
Netting purchase and sale of the same asset class — AS 3 requires gross reporting; show each separately.

Reference:

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Investing Activities – Classification and Examples

Worked example

⚠️ Common exam mistakes