 Hello in this lecture we will define investing activities. According to fundamental accounting principles Wild 22nd edition the definition of investing activities is transactions that involve purchasing and selling long term assets includes making and collecting notes receivable and investments and other than cash equivalents. Support accounting instruction by clicking the link below giving you a free month membership to all of the content on our website, broken out by category further broken out by course each course then organized in a logical reasonable fashion making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems PDF files and more like QuickBooks backup files when applicable. So once again click the link below for a free month membership to our website and all the content on it. When considering investing activities we are looking at them in terms of the statement of cash flows this being a worksheet related to a statement of cash flows form having three parts those three parts of the statement of cash flows including cash flows from operating activities cash flows from investing activities and cash flows from financing activities we are focusing here on cash flows from investing activities note that there are two methods we could use for the statement of cash flows a direct method and an indirect method when we're considering those two methods we're usually concentrating on the cash flows from operating activity generally the largest part of the statement of cash flows basically converting an income statement to that is on a cruel basis to the income statement which will be more on a cash basis and under the direct method we would do that directly basically converting line items and under the indirect method we would do that by starting with net income looking for those differences to arrive from net income to net cash flows from operating activities it's important to note that the other two sections cash flows from investing activities cash flows from financing activities will be the same under either method whether we be using the direct method or the indirect method these being items that will have cash related to them cash inflows and outflows that are not part of the normal operations cash flows from investing activities would include those things that we would assume in investing activities including things like us investing in other company stocks and bonds as well as receivables that we would have from true investments traditional investments we might think of from an individual standpoint in terms of when we invest the thing that's also in investing activities which can be a bit tricky in terms of terminology will be investments in property plants and equipment and the reason that is is because when we put money into property plant and equipment say we buy a machine or something machinery that is an investment in a form of investment the term investment can be a bit confusing a bit tricky because we can use the term investment to mean different things in different contexts when we talk about financing off time or for our personal finances we're usually thinking of the term investment in terms of of stocks and bonds types of investments but note that any long-term asset anything that's going to help us generate revenue in the future in terms of a business perspective in terms of the goal of the business to generate revenue is a form of investment so when we're purchasing long-term assets property plants and equipment those are a type of investment therefore those will go into the investing activities we know that they're not going to be in the operating activities and just so you can memorize this and see why they're not up here note that the normal journal entry when we purchase equipment is not going to involve an income statement account it's it's going to be on the books as an asset and we're going to pay cash or take out a loan we don't have any revenue or expenses therefore it's not going to be in operating and it has to be somewhere in investing or financing and we're going to put it in investing because it is an investment into the future even though it's recorded on the balance sheet under the asset section which could be thought of as a type of investment pretty much all assets are a type of investments that's why we have them in order to help us generate revenue in the future