Occasionally, companies engage in important investing and financing activities which do not affect cash. If the amount of the transaction is significant, how should it be disclosed when financial statements are prepared?

Question

Quizplus · Accepted Answer

Transactions that do not affect cash should be disclosed on the face of the statement of cash flows or in the notes to the financial statements. This ensures that investors and analysts are aware of any significant investing and financing activities that have occurred, even if they did not result in a change in cash. Choosing option A or B would be incorrect because these options suggest that the transaction should be included in the statement of cash flows with a zero balance, which would be misleading. Option D would also be incorrect because it suggests the transaction should be included in both the investing and financing activities section, which is not necessary if the transaction is not related to cash.

Occasionally, Companies Engage in Important Investing and Financing Activities Which