Question

Although a business has had record sales it is having a hard time paying the bills each month. As a manager you are uncertain why this is occurring and ask the financial accountant to explain this situation to you. When the accountant comes to your office they will bring which of the following financial statements as supporting documentation?

Answer 1

Answer:

Income statements and or Cash flow statements.

Explanation:

Income statement and Cash flow statements are required.

Income Statement will give us insight about our costs as we maybe recording sales but if the costs and expenses are too high we are unlikely to be making enough gross profits to be able to pay bills.

Cash flow statements are required as sales may be credit and thus reducing working capital for the company, although they may be making profits but if the debts are uncollected they are unlikely to have cash available to be able to make payments.

Hope that helps.