The statement of cash flows is integrated with the balance sheet because:
A) the cash at the beginning of the period plus or minus the cash flows from operating, investing, and financing activities equals the end of period cash reported on the balance sheet.
B) the cash at the beginning of the period plus or minus the net income equals the end of period cash reported on the balance sheet.
C) the cash at the beginning of the period plus or minus assets and liabilities equals the end of period cash reported on the balance sheet.
D) the cash at the beginning of the period plus or minus the cash flows from operating activities equals the end of period cash reported on the balance sheet.

Question

Quizplus · Accepted Answer

The statement of cash flows shows the sources and uses of cash during a particular period, and it is integrated with the balance sheet because the cash at the beginning of the period plus or minus the cash flows from operating, investing, and financing activities equals the end of period cash reported on the balance sheet. This means that the statement of cash flows provides the explanation of the changes in the cash balance reported on the balance sheet between two periods. Choice B is incorrect because net income is not the same as cash flows, and it does not take into account the investing and financing activities. Choice C is incorrect because assets and liabilities are not directly related to cash flows. Choice D is incorrect because it does not take into account the investing and financing activities.

The Statement of Cash Flows Is Integrated with the Balance