Cash flow activities that include the cash effect of transactions that create revenues and expenses and thus enter into the determination of net income are classified as operating activities on the statement of cash flows.

Question

Quizplus · Accepted Answer

Operating activities on the statement of cash flows are those that involve the cash effect of transactions that relate to the primary business of the company and thus affect net income. This includes the cash inflow from sales and the cash outflow for expenses such as wages, rent, and raw materials used to produce goods or services.

Cash Flow Activities That Include the Cash Effect of Transactions