[ISC] Q. 1 Cash Flow Statement Solution TS Grewal Class 12 (2026-27)

Solution of Question number 1 of the Cash Flow Statement of TS Grewal Book 2026-27 session ISC Board?

State which of the following transactions are classified or shown as Operating Activity:

(i) Cash Paid to Creditors

(ii) Cash received from Debtors

(iii) Interest on Bank Loan

(iv) Rent received

(v) Selling and Distribution Expenses

(vi) Purchase of Building

(vii) Wages and Salaries

(viii) Dividend Paid

Solution:-

Folloing are the Operating Activities:

(i) Cash Paid to Creditors

Reason:-

Cash Paid to Creditors is an Operating Activity because it directly relates to the daily procurement of inventory and goods for business operations. Under accounting frameworks, settling trade payables is classified as a core operational outflow since it directly impacts working capital and primary revenue generation.

(ii) Cash received from Debtors

Reason:

Cash Received from Debtors is an Operating Activity because it is the primary cash inflow from selling a business’s goods or services. Settling trade receivables is a core operational event that directly impacts working capital and main revenue generation.

(v) Selling and Distribution Expenses

Reason

Selling and Distribution Expenses are Operating Activities because they are essential daily costs incurred to market, sell, and deliver goods to customers. Since these expenses directly support the primary revenue-producing operations of the business, they are classified as operational cash outflows.

(vii) Wages and Salaries

Reason

Wages and Salaries are Operating Activities because they represent the direct labor and administrative costs required to run daily business operations. Paying employees is a core operational cash outflow that directly sustains the primary revenue-producing activities of the enterprise.