Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

13. Statement of Cash Flows

Introduction to the Statement of Cash Flows

Financial Accounting

13. Statement of Cash Flows

Introduction to the Statement of Cash Flows

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Multiple Choice

Which section of the statement of cash flows should the cash payment of wages be reported in?

Financing activities

Investing activities

Operating activities

Supplemental disclosures

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Verified step by step guidance

Understand the purpose of the statement of cash flows: It categorizes cash transactions into three main sections—Operating, Investing, and Financing activities—to show how cash is generated and used during a period.

Review the definition of Operating activities: These include cash flows related to the primary operations of the business, such as revenues and expenses. Payments for wages fall under this category because they are part of the day-to-day operations.

Compare Operating activities with Investing and Financing activities: Investing activities involve cash flows from the purchase or sale of long-term assets, while Financing activities involve cash flows related to borrowing, repaying debt, or issuing equity. Wages do not fit into these categories.

Identify the correct section: Since wages are a direct expense incurred during regular business operations, the cash payment for wages should be reported under Operating activities in the statement of cash flows.

Note supplemental disclosures: These provide additional information about cash flow items that may not be directly included in the main sections but are important for understanding the financial position of the company.