Which of the following are methods that are used to prepare a statement of cash flows?
I. Use information obtained directly from the primary records of cash transactions.
II. Use information in the accrual-based statement of profit or loss and statement of financial positions but remove the effect of non-cash items.
III. Use information in the accrual-based statement of profit or loss and statement of financial positions but add the effect of non-cash items.

Question

Quizplus · Accepted Answer

Methods used to prepare a statement of cash flows include using information obtained directly from primary records of cash transactions (I) and using information in the accrual-based statement of profit or loss and statement of financial position but removing the effect of non-cash items (II). Choice III is incorrect, as the method would involve adding the effect of non-cash items, which would lead to double-counting and inaccuracies in the cash flow statement.

Which of the Following Are Methods That Are Used to Prepare