Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Cash Flow Statement

Question:

'Purchase of inventory for cash' is which type of activity in the cash flow statement?

Options:

Operating activity

Investing activity

Financing activity

None of these

Correct Answer:

Operating activity

Explanation:

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.