In order to assess an entity's cash performance it is common to classify its activities into operating, investing and financing. For a small medical practice which of the following would be a financing activity?
A) Paying for medical supplies.
B) Borrowing $20 000 from a financial institution.
C) Billing a patient for a consultation.
D) Adding an extension to allow for 2 additional consultation rooms.

Question

Quizplus · Accepted Answer

Borrowing money from a financial institution is a common financing activity for small businesses, as it involves obtaining external funds to support operations. Option A (Paying for medical supplies) is an operating activity, as it relates to ongoing expenses directly related to providing services. Option C (Billing a patient for a consultation) is a revenue-generating activity and is also considered an operating activity. Option D (Adding an extension to allow for 2 additional consultation rooms) is an investing activity, as it involves longer-term investments in assets that will generate income over time.

In Order to Assess an Entity's Cash Performance It Is