Questions and Answers
What are operating activities?
Operating activities are the types of activities the company performs to generate profits.
What are investing activities?
Investing activities include the purchase or sale of long-lived assets used in operating the business, or the purchase or sale of investment securities.
What are financing activities?
The primary types of financing activities are borrowing money, issuing shares of stock, and paying dividends.
Received $1,200 cash in advance from customer is an example of a[n] _______ activity.
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Received $10,000 cash for services performed is an example of a[n] _______ activity.
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Paid $900 cash for October rent is an example of a[n] _______ activity.
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Paid $600 cash for a one-year insurance policy is an example of a[n] _______ activity.
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Paid $4,000 cash salaries is an example of a[n] _______ activity.
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Purchased equipment for $5,000 cash is an example of a[n] _______ activity.
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Issued stock for $10,000 cash is an example of a[n] _______ activity.
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Issued note payable for $5,000 cash is an example of a[n] _______ activity.
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Paid $500 cash dividend to stockholders is an example of a[n] _______ activity.
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Study Notes
Operating Activities
- Involve actions taken by a company to generate profits.
- Example transactions include receiving cash for services and paying salaries.
Investing Activities
- Concern the purchase or sale of long-lived assets necessary for business operations.
- Involve transactions such as buying equipment or selling investment securities.
Financing Activities
- Focus on obtaining funds and managing capital structure.
- Key activities include borrowing money, issuing stock, and paying dividends.
Examples of Operating Activities
- Received $1,200 cash in advance from a customer, indicating cash inflow from operations.
- Received $10,000 cash for services performed, reflecting revenue generation.
- Paid $900 cash for rent, demonstrating expenses related to business operations.
- Paid $600 cash for a one-year insurance policy, representing operating expense.
- Paid $4,000 in salaries, showing cash outflow to employees.
Examples of Investing Activities
- Purchased equipment for $5,000 cash, indicating capital expenditure to support operations.
Examples of Financing Activities
- Issued stock for $10,000 cash, providing funds through equity financing.
- Issued a note payable for $5,000 cash, indicating debt financing.
- Paid a $500 cash dividend to stockholders, reflecting profit distribution to investors.
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Description
This quiz focuses on understanding the three main categories of cash flow activities in accounting: operating, investing, and financing. Each card presents a definition to help reinforce your knowledge of these crucial concepts in financial management. Test your skills and deepen your comprehension by distinguishing between these activities.
