Choose the correct statement about preparing the statement of cash flows (SCF).
ID: 2576528 • Letter: C
Question
Choose the correct statement about preparing the statement of cash flows (SCF).
a. the SCF is usually prepared after the income statement and balance sheet
b. there is no advantage to preparing the 3 primary financial statements in any particular order
c. like the income statement and balance sheet, SCF preparation mainly involves transferring account balances directly from the ledger
d. a spreadsheet is required for preparing the SCF
e. the SCF repeats most of the information found in the other two statements
a. the SCF is usually prepared after the income statement and balance sheet
b. there is no advantage to preparing the 3 primary financial statements in any particular order
c. like the income statement and balance sheet, SCF preparation mainly involves transferring account balances directly from the ledger
d. a spreadsheet is required for preparing the SCF
e. the SCF repeats most of the information found in the other two statements
Explanation / Answer
Supporting comments :
a. SCF is usually prepared after the income statement and balance sheet :-- Correct.
SCF is a complementing statement to the balance sheet and income statemnt and it is prepared with the help of these two statements.
b.there is no advantage to preparing the 3 primary financial statements in any particular order - Incorrect.
SCF is a mandatory statement because SCF guide the investors about the company's operation and about the cash movements like from where cash is coming and where it is spent.
c.like the income statement and balance sheet, SCF preparation mainly involves transferring account balances directly from the ledger - Incorrect
The cash flow statement is distinct from the income statement and balance sheet because it doesn't include or guide about the future income and expendition or the cash incoming and outgoings. SCF present a view on cash movements and not on net income earned during the year.
d.a spreadsheet is required for preparing the SCF - Correct
Spreadsheet is need to prepare the statement involving sum calulations . it can be prepared using a working paper also.
e. the SCF repeats most of the information found in the other two statements :- Incorrect
The cash flow statement is distinct from the income statement and balance sheet because it doesn't include or guide about the future income and expendition or the cash incoming and outgoings. SCF present a view on cash movements and not on net income earned during the year.