Question

Problem 1-13AB Describing business activities LO C5 A start-up company often engages in the following transactions during its first year of operations. Classify those transactions in one of the three major categories of an organization's business activities. Business Activities Transactions 1. Selling and distributing products. 2. Purchasing a building. 3. Supervising workers. 4. Borrowing cash from a bank. 5. Paying employee wages. 6. Rent cost of office space. 7. Providing client services. 8. Purchasing land.

Answer 1

	Transactions	Business Activities
1	Selling and distributing products.	Operating
2	Purchasing a building.	Investing
3	Supervising workers.	Operating
4	Borrowing cash from a bank.	Financing
5	Paying employee wages.	Operating
6	Rent cost of office space.	Operating
7	Providing client services.	Operating
8	Purchasing land.	Investing

• Business activities are classified into:
  • Operating activities: These are the principal revenue-generating activities of the firm. They are related to the supply of goods or services.
  • Investing activities: It includes the acquisition and disposal of long-term assets and investments.
  • Financing activities: Includes activities related to raising of finance such as the issue of common stock, payment of dividend, repayment of a loan, issue of bonds, etc.