Question

Which of the following is not a category for classifying cash flows in a statement of cash flows? Select one: A. Operating activities B. Nonoperating activities C. Financing activities D. Investing activities E. None of the above

Answer 1

Answer:

B. Non Operating Activities

Explanation:

A Cash Flow Statement depicts the inflow and outflow of cash. The statement follows cash basis and not accrual basis.

The statement classifies cash flows into three categories, namely;

1. Cash Flows from Operating Activities: This part is basically about cash inflow/outflow resulting out of normal operations of an enterprise. It is concerned with recording inflow/outflow on working capital needs. Like increase in accounts receivables, decrease in notes payable etc.

2. Cash Flows from Investing Activities: This part deals with recording cash outflow/inflow resulting out of sale, purchase of land and building and other fixed assets and investments.

3. Cash Flows from Financing Activities; This part deals with recording inflow/outflow when an enterprise issues stocks, bonds, retires debt or pays dividend. It records the outflows and inflows arising due to long term financing.

Thus, B. Non Operating Activities is not a category for classifying cash flows in a statement of cash flows.