Using the direct method of preparing the statement of cash flows, which of the following is not an activity generating operating cash flows?
A)Collections from customers
B)Collection of notes receivable
C)Payments for income taxes
D)Payments to employees

Question

Quizplus · Accepted Answer

Collection of notes receivable is not an activity generating operating cash flows. It is a financing activity as notes receivable represents a loan given to customers. Operating cash flows are generated from day-to-day business activities such as sales, collection of accounts receivable, payments to suppliers, payments to employees, etc. Payments for income taxes are also an activity generating operating cash flows as they are associated with the payment of taxes on operating income.

Using the Direct Method of Preparing the Statement of Cash