What questions does the statement of cash flows answer?

The reporting objectives of the statement of cash flows is to provide information about important cash inflows and outflows for business decision makers. It answers specific questions such as: (1) how does a company obtain its cash? (2) Where does a compay spend its cash? (3)What is the change in the cash balance?

What types of questions does the statement of cash flows answer quizlet?

A statement of cash flows helps answer all of the following: – What explains the changes in the cash account? – Where does a company spend its cash? – How does a company receive its cash?

What is found on the statement of cash flows?

A cash flow statement is a financial statement that provides aggregate data regarding all cash inflows a company receives from its ongoing operations and external investment sources. It also includes all cash outflows that pay for business activities and investments during a given period.

Which of the following are purposes of the statement of cash flows?

1. The primary purpose of the statement of cash flows is to provide information about cash receipts, cash payments, and the net change in cash resulting from the operating, investing, and financing activities of a company during the period.

What is a statement of cash flows quizlet?

Shows the changes in cash for the same period of time as that covered by the income statement. The cash flow statement shows all sources of cash and all of the uses of cash.

What are cash flows quizlet?

Cash flow is the difference between the amount of cash the company has at the beginning of an accounting period versus the amount of cash it has at the end of an accounting period. Cash flow represents, or is based upon, the operating activities of the business.

What is the proper ordering of activities in the statement of cash flows?

The correct order is investing, operating, financing.

Which of the following statements about the statement of cash flows is incorrect?

The incorrect statement is option c as the operating section is not the last section of the statement. Rather it is the first activity in the statement of cash flow. The activities in chronological include operating activity, investing and financing activity.

Which of the following is an example of a cash inflow?

Examples of cash inflows from operating activities are: Cash receipts from the sale of goods and services. Cash receipts from the collection of receivables. Cash receipts from lawsuit settlements.

How do you prepare a statement of cash flows using the direct method?

The simplest format of the direct method looks something like this:
  1. Cash Flow from Revenue.
  2. – Cash Payments for Expenses.
  3. = Income Before Income Taxes.
  4. – Cash Payment for Income Taxes.
  5. = Net Cash Flow From Operating Activities.

How do you prepare a statement of cash flows?

How to Create a Cash Flow Statement
  1. Determine the Starting Balance. …
  2. Calculate Cash Flow from Operating Activities. …
  3. Calculate Cash Flow from Investing Activities. …
  4. Calculate Cash Flow from Financing Activities. …
  5. Determine the Ending Balance.

What type of activity is the purchase of equipment for cash?

What type of activity is the purchase of equipment for cash? Investing activities deal with the cash acquisition and sale of long-term assets.

How do you prepare a statement of cash flows from the balance sheet and income statement?

Building a Cash Flow Statement
  1. Step 1: Remember the Interconnectivity Between P&L and Balance Sheet. …
  2. Step 2: The Cash Account Can Be Expressed as a Sum and Subtraction of All Other Accounts. …
  3. Step 3: Break Down and Rearrange the Accounts. …
  4. Step 4: Convert the Rearranged Balance Sheet Into a Cash Flow Statement.

How do you know if a cash flow statement is correct?

Compare the change in cash figure with your net increase in cash or net decrease in cash from your statement of cash flows. If the results are the same, the statement of cash flows is correct. If they are different, there may be an error on the statement of cash flows.