Final answer:
Cash collections on account and cash collections on notes receivable are classified as cash inflows from operating activities in a company's cash flow statement. These reflect the inflow of money from customers referring to payments against credit purchases and payments on promissory notes, which are core to the operational revenue-producing activities of a business.
Step-by-step explanation:
The question relates to the classification of cash flows in the context of financial accounting and reporting, specifically within the cash flow statement which is a key financial statement used in businesses. The statement reflects how changes in the balance sheet and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities.
Collection of cash on account typically refers to the inflow of cash from customers who are making payments against their accounts receivable. This is the money owed by customers who have purchased goods or services on credit. Similarly, collection of cash on notes receivable involves receiving payments on a promissory note - a financial instrument where one party promises in writing to pay a determinate sum of money to the other, either at a fixed or determinable future time or on demand of the payee, under specific terms.
Both these types of transactions are classified as cash inflows from operating activities. Operating activities are the principal revenue-producing activities of the entity and other activities that are not investing or financing activities. Essentially, cash inflows from operating activities include receipts from the sale of goods or services, receipts for the sale of loans, notes, accounts receivable, and other similar receipts.