Question

What will be the effect of the transaction ‘Payment of employee benefit expenses’ on the cash flow statement?

• A. Outflow from operating activities.
• B. Outflow from investing activities.
• C. Outflow from financing activities.
• D. No effect on cash flow.

Hint:

Operating activities include cash flows directly related to the core operations of a business, such as revenue generation and expense payments.

Answer 1

The Correct Option is A

Employee benefit expenses are considered operating expenses as they are directly related to the day-to-day activities of the business. Hence, their payment will result in an outflow of cash under operating activities.
Thus, the correct answer is \( \mathbf{(A)} \) Outflow from operating activities.