Question

Which of the following are operating activities for the purpose of preparing cash flow statement?
Cash payments to suppliers for goods and services.
Dividend received from investments in other enterprises.
Cash receipts from royalties, fees, commissions and other revenues.
Cash repayments of amounts borrowed.

• A. (i), (ii) and (iii)
• B. (i) and (iii)
• C. (i), (iii) and (iv)
• D. (iii) and (iv)

Hint:

In Cash Flow Statements, dividends received are investing inflows (except for financial enterprises) while repayments of borrowings fall under financing activities.

Answer 1

The Correct Option is B

The correct classification of operating activities is (B) (i) and (iii).
Explanation: Operating activities encompass cash flows directly linked to revenue generation and regular business operations.
(i) Cash paid to suppliers is classified as an operating activity.
(ii) Dividends received are categorized as an investing activity for non-finance companies, according to AS-3 (Revised).
(iii) Cash received from royalties, fees, and commissions constitutes an operating activity.
(iv) Repayment of borrowed funds is considered a financing activity.Therefore, only (i) and (iii) are operating activities.