(a)
Financial statement
A financial statement is the complete record of financial transactions that take place in a company at a particular point of time. It provides important financial information like assets, liabilities, revenues and expenses of the company to its internal and external users. It helps them to know the exact financial position of the company. There are four basic financial statements; they are:
- Balance Sheet
- Income statement
- Statement of
retained earnings - Statement of
cash flows
To define:
The statement of cash flows.
(a)
Explanation of Solution
Statement of cash flow is a financial statement that shows the cash and cash equivalents of a company for a particular period of time. It shows the net changes in cash, by reporting the sources and uses of cash as a result of operating, investing, and financing activities of a company.
(b)
To ascertain:
Whether cash flow statement is an optional financial statement.
(b)
Answer to Problem 1Q
No, Cash flow statement is not an optional financial statement.
Explanation of Solution
As per Generally Accepted Accounting Principles (GAAP) it is mandatory that a company must prepare statement of cash flows, when preparing financial statement for a company. It is the one of the basic financial statement which is required to be prepared by the company.
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Chapter 12 Solutions
FINANCIAL ACCOUNTING:TOOLS FOR BUSINESS
- What function does the statement of cash flows serve, as one of the four basic financial statements?arrow_forwardWhich is the proper order of the sections of the statement of cash flows? A. financing, investing, operating B. operating, investing, financing C. investing, operating, financing D. operating, financing, investingarrow_forwardWhich of the following statements is false? A. Noncash activities should be reported in accrual basis financial statements. B. Net cash flow from operating activities relates to normal business operations. C. Net income usually equals net cash flow from operating activities. D. The statement of cash flows is an essential part of the basic financial statements.arrow_forward
- For each of the following independent situations, place an (X) by the transactions that would be included in the statement of cash flows. Table 2.6arrow_forwardWhen preparing the operating section of the statement of cash flows, using the indirect method, how must gains and losses be handled? Why?arrow_forwardWhich of the following would be considered a cash outflow for investing activities? a. cash paid to purchase product for inventory b. cash paid to reacquire common stock c. cash paid to repay debt d. cash paid to purchase equipmentarrow_forward
- Need for a Statement of Cash Flows. The accrual basis of accounting creates the need for a statement of cash flows. Explain.arrow_forwardFor each independent situation below, place an (X) by the transactions that would be included in the statement of cash flows. Table 2.3arrow_forwardIn which section of the statement of cash flows would each of the following transactions be included? For each, identify the appropriate section of the statement of cash flows as operating (O), investing (I), financing (F), or none (N). (Note: some transactions might involve two sections.) A. collected accounts receivable from customers B. issued common stock for cash C. declared and paid dividends D. paid accounts payable balance E. sold a long-term asset for the same amount as purchasedarrow_forward
- Which of the following represents a source of cash in the investing section? A. sale of investments B. depreciation expense C. decrease in accounts receivable D. decrease in bonds payablearrow_forwardWould there ever be activities that relate to operating, investing, or financing activities that would not be reported in their respective sections of the statement of cash flows? Explain. If a company had any such activities, how would they be reported in the financial statements, if at all?arrow_forwardProvide the missing piece of information for the following statement of cash flows puzzle.arrow_forward
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