Which of the following is an operating activity while preparing a cash flow statement of the company?
A) Cash sales
B) Cash received from trade receivables
C) Purchase of building
D) Sale of building
E) Issue of share capital
F) Buy back of equity shares
G) Dividend paid
H) Interest paid on long-term debentures
I) Cash purchases
J) Cash paid to trade payables
Choose the correct answer from the options given below.
Answer & explanation
Correct answer: option 1
The correct answer is option 1- ABIJ.
Operating activities are the principal revenue-generating activities of a business and include cash transactions related to day-to-day business operations.Thus:
- A) Cash sales → Operating activity
- B) Cash received from trade receivables → Operating activity
- I) Cash purchases → Operating activity
- J) Cash paid to trade payables → Operating activity
The remaining items belong to investing or financing activities:
- C) Purchase of building → Investing activity
- D) Sale of building → Investing activity
- E) Issue of share capital → Financing activity
- F) Buy back of equity shares → Financing activity
- G) Dividend paid → Financing activity
- H) Interest paid on long-term debentures → Financing activity
NCERT: Cash flows from operating activities primarily stem from the core operations of the business. They mainly arise from transactions and events that contribute to the determination of net profit or loss. Examples of cash flows from operating activities encompass:
Cash Inflows from Operating Activities:
* Cash received from the sale of products and provision of services.
* Cash received from royalties, fees, commissions, and other sources of income.
Cash Outflows from Operating Activities:
* Cash disbursed to suppliers for acquiring goods and availing services.
* Cash disbursed to employees and on their behalf.
* Cash payments to an insurance company for premiums, claims, annuities, and related policy benefits.
* Cash payments for income taxes, unless these payments can be specifically attributed to financing or investing activities.