What are operating activities?

In the statement of cash flows, cash flow information is reported within three separate classifications, one of which is operating activities. Operating activities are an entity’s primary revenue-producing activities, so cash flows are generally associated with revenues and expenses.

Examples of cash inflows from operating activities are:

  • Cash receipts from the sale of goods and services
  • Cash receipts from the collection of receivables
  • Cash receipts from lawsuit settlements
  • Cash receipts from the settlement of insurance claims
  • Cash receipts from supplier refunds
  • Cash receipts from licensees

Examples of cash outflows for operating activities are:

  • Cash payments to employees
  • Cash payments to suppliers
  • Cash payments of fines
  • Cash payments to settle lawsuits
  • Cash payments of taxes
  • Cash refunds to customers
  • Cash payments to settle asset retirement obligations
  • Cash payments of interest to creditors
  • Cash payments of contributions

The other two classifications used in the statement of cash flows are investing activities and financing activities. The operating activities classification is the default classification, so if a cash flow does not belong in either of the other classifications, it is placed in operating activities.

Related Courses

The Statement of Cash Flows