Question

Revenue on account amounted to $3,000. Cash collections of accounts receivable amounted to $2,700. Cash paid for expenses amounted to $2,500. Cash flow from operating activities is:

-$200.
-$300.
-$500.
-None of the above.

Answer 1

Cash flow from operating activities is calculated as cash collections minus cash paid for expenses. In this case, it is $2,700 collected minus $2,500 paid out, resulting in a positive cash flow of $200 from operating activities.

Step-by-step explanation:

To calculate the cash flow from operating activities, we should account for cash transactions related to normal business operations.

Cash flow from operating activities is calculated using the formula:

Cash flow from operating activities = Revenue on account - Cash collections of accounts receivable + Cash paid for expenses

Substituting the given values into the formula: - Cash flow from operating activities = $3,000 - $2,700 + $2,500 = -$200

This calculation results in a cash flow from operating activities of $200 ($2,700 - $2,500). As there is no other cash flow information provided, this is for the cash flow from operating activities. It is positive, indicating that the company has more inflows than outflows from its primary business activities in this scenario.