Question

In a statement of cash flows: Multiple Choice No noncash transactions are reported in the statement itself or the related footnote. Operating activities are the same activities as reported in the income statement. The two primary reporting classifications of cash flows are inflows and outflows. Inflows and outflows for cash equivalents are reported as operating activities.

Answer 1

Answer:

The answer is C. The two primary reporting classifications of cash flows are inflows and outflows

Explanation:

Statement of Cash flows is prepared using cash basis i.e it recognizes outflow only when money goes out of the business and recognizes inflow only when money comes in. This is unlike accrual basis. So the primary reporting classifications are inflow and outflow.

Option A is incorrect because non cash transactions are reported in the statement. For example, depreciation under indirect method of preparing operating cash flow is a non cash transaction.

Option B is wrong because operating activities under cash flow statement are not the same as reported under income statement.

Option D is wrong because inflow and outflow are reported under all the three sections of statement of cash flow