The Following Item Would Be Classified as an Operating Activity

question 1

Multiple Choice

The following item would be classified as an operating activity on the statement of cash flows:

• A)Payments for inventory.
• B)Acquisitions of equipment.
• C)Proceeds from borrowing.
• D)Payments on loans.

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Definitions:

Absorption Costing

Absorption costing is an accounting method that includes all manufacturing costs (both variable and fixed) in the cost of a product.

Variable Costing

Variable costing is an accounting method that only considers variable costs (costs that change with production levels) in the calculation of product or service costs, excluding fixed costs.

Gross Profit

The difference between sales revenue and the cost of goods sold, directly indicating the efficiency of core business activities.

Absorption Costing

A method of inventory costing that includes all manufacturing costs, both variable and fixed, in the cost of a product.