Which of the following is/are fact(s) related to cash flows from Operating Activities and Investing Activities?
(A) Receipt from interest and dividends will lead to cash inflow under Operating Activities
(B) Receipt from royalties, fees etc. are cash inflows under Operating Activities
(C) Payment of employee benefit expenses are cash outflow under Operating Activities
(D) Payment for purchase of plant leads to cash outflow under Investing Activities
(E) Payment of taxes are considered as cash outflow under Financing Activities
Choose the correct answer from the options given below.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (B), (C) and (D) only
As per AS-3, receipts and payments arising from the main revenue-earning activity are operating; buying and selling long-term assets is investing; for a non-financial company, interest and dividends received are investing inflows, and taxes are operating unless specifically identified with financing or investing.
(A) Receipt from interest and dividends will lead to cash inflow under Operating Activities — False. For a non-financial enterprise they are inflows from investing activities.
(B) Receipt from royalties, fees etc. are cash inflows under Operating Activities — True. They are part of the revenue of the business.
(C) Payment of employee benefit expenses are cash outflow under Operating Activities — True. Salaries and wages are a running expense of the business.
(D) Payment for purchase of plant leads to cash outflow under Investing Activities — True. Plant is a long-term asset.
(E) Payment of taxes are considered as cash outflow under Financing Activities — False. Income tax paid is shown under operating activities unless it can be specifically identified with financing or investing activities.
NCERT (2026-27 edition):
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