Cash payments made to employees for wages and salaries; payments made to vendors

Question

Cash payments made to employees for wages and salaries; payments made to vendors for the purchase of merchandise; taxes paid to government agencies; payments for rent, utilities, and insurance will show up on the statement of cash flows under the category of

a.

cash flows from financing activities.

b.

cash flows from investing activities.

c.

cash flows from operating activities.

d.

a and b above.

e.

b and c above.

Cash payments made to employees for wages and salaries; payments made to vendors for the purchase of merchandise; taxes paid to government agencies; payments for rent, utilities, and insurance will show up on the statement of cash flows under the category of

a.

cash flows from financing activities.

b.

cash flows from investing activities.

c.

cash flows from operating activities.

d.

a and b above.

e.

b and c above.

Explanation / Answer

Any payments or proceeds of liabilities and equity are shown under the category of financing activities

Any payment or proceeds of assets are shown under the category of investing activites

Any payment or receipts relating to business operations are shown under the category of operating activites.

Given all payments are related to business operations should be shown under the category of operating activities. Hence, option C is correct

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