Multiple Choice
It is important to analyze the sources and uses of cash because:
1
views
13. Statement of Cash Flows
Introduction to the Statement of Cash Flows
Multiple Choice
Which of the following lists the four steps in preparing a statement of cash flows in the correct order?
A
1. Determine the net increase or decrease in cash
2. Calculate net cash provided or used by operating activities
3. Calculate net cash provided or used by investing activities
4. Calculate net cash provided or used by financing activities
B
1. Prepare the income statement
2. Prepare the balance sheet
3. Prepare the statement of cash flows
4. Reconcile net income to net cash from operating activities
C
1. Determine the net increase or decrease in cash
2. Analyze operating activities
3. Analyze investing activities
4. Analyze financing activities
D
1. Determine the net increase or decrease in cash
2. Analyze changes in noncash accounts
3. Prepare separate sections for operating, investing, and financing activities
4. Reconcile the net change in cash with the beginning and ending cash balances
Verified step by step guidance1
Step 1: Understand the purpose of the statement of cash flows, which is to summarize the cash inflows and outflows from operating, investing, and financing activities during a specific period.
Step 2: Begin by determining the net increase or decrease in cash. This involves comparing the beginning and ending cash balances from the balance sheet.
Step 3: Analyze changes in noncash accounts, such as accounts receivable, inventory, and accounts payable, to identify adjustments needed for the operating activities section.
Step 4: Prepare separate sections for operating, investing, and financing activities. Operating activities include cash flows from day-to-day business operations, investing activities include cash flows from buying or selling assets, and financing activities include cash flows from borrowing or repaying debt or issuing equity.
Step 5: Reconcile the net change in cash with the beginning and ending cash balances to ensure the statement of cash flows is accurate and complete.
Related Videos
Related Practice
