Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

13. Statement of Cash Flows

Introduction to the Statement of Cash Flows

Financial Accounting

13. Statement of Cash Flows

Introduction to the Statement of Cash Flows

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Multiple Choice

Which of the following is correct about the statement of cash flows?

It is prepared using only the accrual basis of accounting.

It shows only the net income of a company for a period.

It excludes non-cash transactions from its disclosures.

It reports cash inflows and outflows classified into operating, investing, and financing activities.

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Verified step by step guidance

Understand the purpose of the statement of cash flows: It provides information about a company's cash inflows and outflows during a specific period, helping users assess the company's liquidity, solvency, and financial flexibility.

Recognize the classification of cash flows: The statement of cash flows categorizes cash transactions into three main activities: operating, investing, and financing. Operating activities relate to the core business operations, investing activities involve the acquisition or disposal of long-term assets, and financing activities pertain to transactions with creditors and investors.

Clarify the basis of preparation: Unlike the accrual basis used in the income statement, the statement of cash flows is prepared using the cash basis of accounting, focusing solely on actual cash movements.

Understand the treatment of non-cash transactions: Non-cash transactions, such as depreciation or stock issuance, are excluded from the main body of the statement of cash flows but may be disclosed in the notes to the financial statements.

Identify the correct statement: The statement of cash flows reports cash inflows and outflows classified into operating, investing, and financing activities, making this the correct answer to the problem.