A company earned Rs. 12,000 as interest on its savings bank account during the year. Under the cash flow statement, this cash inflow should be classified under which activity?
Answer
Operating activity
The correct answer is Operating activity — According to cash flow classification, such receipts are reported under operating activities.
Step-by-step solution
- Identify the source of cash: interest earned on a bank account is a cash receipt.
- Cash receipts from interest are part of the company's regular operating transactions.
- According to cash flow classification, such receipts are reported under operating activities.
Common mistake: Treating interest received as an investing activity
Concept tested: Classification of cash flows
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