Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Cash Flow Statement

Question:

Cash sales is an example of cash flow from which of the following activity?

Options:

Operating Activity

Investing Activity

Financing Activity

None of these

Correct Answer:

Operating Activity

Explanation:

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.