Question

Which of the following transactions will result in cash flows from operating activities?

• A. Cash receipts from sale of investments ₹ 60,000
• B. Cash receipts from sale of goods ₹ 94,000
• C. Dividend received ₹ 31,000
• D. Payment of cash for purchase of fixed assets ₹ 3,00,000

Hint:

Always classify cash flows based on their relation to operating, investing, or financing activities as per accounting standards.

Answer 1

The Correct Option is B

- Operating activities encompass cash flows derived from a company's primary revenue-generating operations. - The sale of goods is categorized as an operating activity because it represents a core business function. - Transactions such as the sale of investments and the receipt of dividends fall under investing activities. Furthermore, expenditures on fixed assets are also considered investing activities.