To prepare the statement of cash flows requires analyzing changes in balance sheet accounts during the accounting period. As an outcome of correct double-entry recording of all transactions, the net change in cash will be _____ the net change in all noncash accounts.
A)greater than
B)less than
C)equal to
D)greater than or be less than
E)greater than or be equal to

Question

Quizplus · Accepted Answer

The statement of cash flows uses the indirect method to calculate the net change in cash for the accounting period. This method involves adjusting net income for any non-cash items and changes in non-cash balance sheet accounts such as accounts receivable, accounts payable, and inventory. The final section of the statement reconciles the net change in these non-cash accounts to the actual change in cash for the period. Therefore, the net change in cash will be equal to the net change in all noncash accounts.

To Prepare the Statement of Cash Flows Requires Analyzing Changes