Question

The first step in creating a cash flow statement is which of the following?

Answer 1

Answer:

C. Recording Income.

Explanation:

The first step to prepare a cash flow statement is to show the Net Income of that company. It is an operating cash flow activities, one of three activities of cash flow statement.

Answer Choice A can not be the answer as the company cannot record any goals in cash flow because cash flow is a statement of cash inflow and outflow.

Answer choice B cannot be the answer as expenses are not shown in the cash flow statement either (If indirect method). However, after adjusting prepaid and advance or paid to suppliers are shown below the noncash account.

Answer choice D is not an option as tax information can be shown only if they are accrued or prepaid.

Therefore, C is the correct answer.