Question

Which of the following statements is correct?

• A. Proceeds from sale of goods and services will result in cash outflow from operating activities.
• B. Payment of dividend will result in cash outflow from investing activities.
• C. Sale of machinery will result in cash outflow from investing activities.
• D. Payment of employee benefit expenses will result in cash outflow from operating activities.

Hint:

Only day-to-day expense items go under Operating Activities. Employee expenses fall under this head.

Answer 1

The Correct Option is D

Employee expenses are day-to-day operational costs and are classified under Operating Activities. The other options are either incorrect classification or state “outflow” where “inflow” applies.