Which of the following statements about the cash flow statement is true?
A)The cash flow statement reports what the net income would be if the cash basis of accounting had been followed.
B)The cash flow statement deals with cash, an asset; therefore, the cash flow statement is a snapshot statement just like the balance sheet.
C)The cash flow statement does not have to be included in general purpose financial statements.
D)The cash flow statement shows how the company managed its money for the period from more than just operations.

Question

Quizplus · Accepted Answer

The cash flow statement shows the inflow and outflow of cash for the period, including how the company managed its money from sources other than operations. Option A is incorrect because the cash flow statement reports actual cash inflows and outflows, not what the net income would be if the cash basis of accounting had been followed. Option B is incorrect because the cash flow statement is a change statement, not a snapshot statement like the balance sheet. Option C is incorrect because the cash flow statement is a required component of general purpose financial statements under generally accepted accounting principles (GAAP).

Which of the Following Statements About the Cash Flow Statement