"Cash Payment to and on behalf of the employees" will be classified under -

Operating Activities

The correct answer is Option (1) - Operating Activities.

"Cash Payment to and on behalf of the employees" will be classified under Operating Activities.

Cash flows from operating activities are primarily derived from the main activities of the enterprise. They generally result from the transactions and other events that enter into the determination of net profit or loss. Examples of cash flows from operating activities are:

Cash Inflows from operating activities:

• cash receipts from sale of goods and the rendering of services.
• cash receipts from royalties, fees, commissions and other revenues.

Cash Outflows from operating activities:

• Cash payments to suppliers for goods and services.
• Cash payments to and on behalf of the employees.
• Cash payments to an insurance enterprise for premiums and claims, annuities, and other policy benefits.
• Cash payments of income taxes unless they can be specifically identified with financing and investing activities.