The primary purpose of the statement of cash flows is to:show the deficit of cash during the period.provide information about the profit or loss during the accounting period.provide information about the cash receipts and cash payments made during the accounting period.show the cash balance at the end of the period.
Question
The primary purpose of the statement of cash flows is to:show the deficit of cash during the period.provide information about the profit or loss during the accounting period.provide information about the cash receipts and cash payments made during the accounting period.show the cash balance at the end of the period.
Solution
The primary purpose of the statement of cash flows is to:
- Provide information about the cash receipts and cash payments made during the accounting period.
The statement of cash flows is one of the main financial statements and it provides detailed information about how a company has received and used cash during a specific period. It categorizes cash flows into three activities: operating (cash flows from regular business operations), investing (cash flows from the acquisition and disposal of long-term assets), and financing (cash flows from and to owners and creditors such as dividends paid and capital raised).
While the statement of cash flows does show the net increase or decrease in cash during the period and the cash balance at the end of the period, its primary purpose is not to show the deficit of cash or the cash balance at the end of the period.
Also, while it can provide some insight into a company's profitability, its main purpose is not to provide information about the profit or loss during the accounting period. That's the role of the income statement.
Similar Questions
The statement of cash flows reports:Multiple ChoiceEquity, net income, and dividends.Assets, liabilities, and equity.Cash receipts (inflows) and cash payments (outflows) for an accounting period.Changes in equity.Revenues, gains, expenses, and losses.
The statement of cash flows, provides users of financial statements with a basis to assess the ability of the entity to generate cash and cash equivalents and the needs of the entity to utilize those cash flowsGroup of answer choicesTrueFalse
The statement of cash flows is a financial statement that shows ______.
The statement of cash flows is:Multiple ChoiceA financial statement that lists the types and amounts of the revenues and expenses of a business for an accounting period.Another name for the statement of financial position.A financial statement that reports the cash receipts (inflows) and cash payments (outflows) for an accounting period, and that classifies those cash flows as operating activities, investing activities, or financing activities.A financial statement that lists the types and amounts of assets, liabilities, and equity of a business on a specific date.A financial statement that presents information about changes in equity during a period.
The Statement of cash flows helps management, investors, creditors and other interested parties evaluate the following about the entity (choose all that apply):Group of answer choicesCash investing and financing transactions for the periodExplains the difference between profit and net cash provided (used) by operating activitiesAbility to pay share dividends and meet obligationsAbility to generate future cash flows
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