A decreasing long-term liability account is presented on the statement of cash f

Question

A decreasing long-term liability account is presented on the statement of cash flows as:

a) an increase in cash in the Operating Activities category.

b) an increase in cash in the Financing Activities category.

c) a decrease in cash in the Investing Activities category.

d) a decrease in cash in the Financing Activities category.

I was told that the answer is C... BUT... Why is the answer not D? Because most long term liabilities will be things like debt....? For answer C, what kind of long term liability could be described as a investing activity?

Explanation / Answer

A Decrease in Long Term Liability will result in Cash Out Flow which must be disclosed/ presented as Cash outflow under the financing activities only but not in Investing activities.

Hence the Answer to the above Question is Only D but not C.

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