Final answer:
Payment of income taxes payable affects the statement of cash flows in the operating activities section by reducing net cash provided by operating activities. It is considered a cash outflow and subtracted from net income.
Step-by-step explanation:
Payment of income taxes payable affects the statement of cash flows in the operating activities section. When a company pays income taxes, it is considered a cash outflow and is subtracted from net income to arrive at net cash provided by operating activities. This is because income taxes payable represent an obligation to pay taxes to the government and are not considered an expense in the period they are accrued.
For example, if a company has a net income of $100,000 and pays $20,000 in income taxes, the statement of cash flows will show a deduction of $20,000 under the operating activities section. This reduces the net cash provided by operating activities to $80,000.
Keywords: income taxes payable, statement of cash flows, operating activities, cash outflow, net income, net cash provided, expense, accrued