Each of the following are classified as an operating activity except:

• A. Paying suppliers for inventory
• B. Collecting cash from customers
• C. Purchasing equipment for cash
• D. Paying salaries to employees

Answer: (C)

Verified step by step guidance

1. Understand the concept of operating activities: Operating activities are the primary revenue-generating activities of a business and include transactions related to the core operations, such as selling goods or services, paying suppliers, and paying employees.
2. Review the examples provided in the problem: Paying suppliers for inventory, collecting cash from customers, and paying salaries to employees are all directly related to the day-to-day operations of the business.
3. Identify the exception: Purchasing equipment for cash is not an operating activity. Instead, it is classified as an investing activity because it involves the acquisition of long-term assets used in the business.
4. Clarify the distinction between operating and investing activities: Operating activities focus on short-term operational transactions, while investing activities involve the purchase or sale of long-term assets like equipment, property, or investments.
5. Conclude the classification: The correct answer is 'Purchasing equipment for cash,' as it is not an operating activity but an investing activity.