Question : Decrease in outstanding employees benefits expenses by Rs.3,000, will increase, decrease or have no effect on cash flow from operating activities while preparing 'Cash Flow Statement':
Option 1: Increase
Option 2: Decrease
Option 3: No effect
Option 4: None of the above
Correct Answer: Decrease
Solution : Answer = Decrease
A decrease in outstanding employees' benefits expenses implies less cash outflow for these expenses. This reduces the cash flow from operating activities because less cash is being used for operating expenses. Therefore, it decreases the cash flow from operating activities as less cash is leaving the company for these expenses.
Hence, the correct option is 2.