Which item would be classified as operating activities?

Which item would be classified as operating activities?

• A. Paying salaries
• B. Purchasing land
• C. Issuing stock
• D. Purchasing equipment

Answer: (A)

Cash flows are categorized into operating, investing, and financing activities. Operating activities cover the day-to-day cash flows necessary to run the business and generate revenue. Paying salaries is a routine expense tied to operating the business, so it represents an operating cash outflow. Purchasing land and purchasing equipment are investing activities because they involve long-term assets. Issuing stock is a financing activity because it affects the company’s equity and how it raises capital. So paying salaries best fits the operating activities classification.

Cash flows are categorized into operating, investing, and financing activities. Operating activities cover the day-to-day cash flows necessary to run the business and generate revenue. Paying salaries is a routine expense tied to operating the business, so it represents an operating cash outflow.

Purchasing land and purchasing equipment are investing activities because they involve long-term assets. Issuing stock is a financing activity because it affects the company’s equity and how it raises capital.

So paying salaries best fits the operating activities classification.