Question : Under which type of activity will you classify Income Tax paid while preparing the Cash Flow Statement?
Option 1: Operating activities
Option 2: Investing activities
Option 3: Financing activities
Option 4: Cash and cash equivalents
Correct Answer: Operating activities
Solution : Answer = Operating activities
Income tax paid is classified as an operating activity when preparing the Cash Flow Statement. This is because income tax is considered an operating expense, directly related to the company's primary business operations, and is therefore included in the operating activities section of the statement. Hence, the correct option is 1.
Question : Under which type of activity will you classify 'Refund of Income Tax received' while preparing the Cash Flow Statement?
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