A company's balance sheet shows the account, Notes Payable.This resulted from a loan made by the company's bank.If the end-of-year balance in the notes payable account exceeds the beginning-of-year balance by $5,000, this is shown on the cash flow statement as an
A) inflow of cash of $5,000 in the operating activities category.
B) outflow of cash of $5,000 in the operating activities category.
C) inflow of cash of $5,000 in the financing activities category.
D) outflow of cash of $5,000 in the financing activities category.

Question

Quizplus · Accepted Answer

An increase in the Notes Payable account signifies that the company has borrowed more money from the bank during the year. This increase is considered as an inflow of cash in the financing activities category of the cash flow statement because it represents a source of funds for the company. Therefore, option C is the correct answer.

A Company's Balance Sheet Shows the Account, Notes Payable