Question

Which of the following statements is correct regarding preparation of the statement of cash flows? a. Amounts reported in the income statement are the same as the cash effects of the items reported. b. There can be no cash inflow or cash outflow without a corresponding change in a noncash account. c. When the sale of an asset results in a gain, the gain will equal the cash flow reported in the investing section of the statement of cash flows. d. All of the choices are correct.

Answer 1

Answer:

b. There can be no cash inflow or cash outflow without a corresponding change in a non-cash account.

Explanation:

There is only one cash account and no other account, if there is an inflow, there will be some non cash account related as for example, cash received from customers as is non cash account, accounts receivables.

Also in case of cash outflow, there will be some non cash account responsible for such transactions. As for example, payment for acquiring land, land is fixed asset which is a non cash account.

All other statements are incorrect.