We use the income statement and changes in the related balance sheet accounts to compute the cash effect for the cash flow statement.

Question

Quizplus · Accepted Answer

This statement is true. The income statement provides information about revenues and expenses, while changes in balance sheet accounts (such as accounts receivable, accounts payable, inventory, etc.) affect the amount of cash that flows in or out of a company. By analyzing both the income statement and changes in balance sheet accounts, we can determine the cash effect and prepare the cash flow statement.

We Use the Income Statement and Changes in the Related