Operating,investing,and financing activities affect certain balance sheet accounts.Which of the following statements is true?
A)Operating activities primarily involve transactions that affect noncurrent assets.
B)Investing activities primarily involve U.S.government securities and long-term productive assets.
C)Financing activities primarily involve transactions that affect current liabilities.
D)Different balance sheet accounts are affected depending on whether the direct or indirect method is used.

Question

Quizplus · Accepted Answer

Investing activities primarily involve purchases and sales of productive assets such as property, plant, and equipment, as well as investments in securities. U.S. government securities can be included in the investments category. Operating activities primarily involve transactions related to current assets and liabilities, such as sales and purchases of inventory and payment of salaries. Financing activities primarily involve transactions related to debt and equity, such as issuance of bonds or payment of dividends. The different methods of preparing the cash flow statement (direct or indirect) affect the format and presentation of the operating activities section but do not change the underlying balance sheet accounts affected.

Operating,investing,and Financing Activities Affect Certain Balance Sheet Accounts