Question

Preparation of the statement of cash flows does not involve: Select one: a. Computing the net increase or decrease in cash. b. Computing and reporting net cash provided or used by operations. c. Computing the profit compared to the net increase or decrease in cash. d. Computing and reporting net cash provided or used by financing activities. e. Computing and reporting net cash provided or used by investing activities.

Answer 1

Answer:

c. Computing the profit compared to the net increase or decrease in cash.

Explanation:

In a typical cash flow statements, the company's activities are divided into 3 sections that are recognized in the cash flow statements.

These are operating activities, investing activities and financing activities.

Operating activities includes cash inflow/outflow as a result of changes to inventory, payables and receivables.

Investing activities includes cash inflow/outflow from the disposal/acquisition of assets while financing includes cash inflow/outflow from the sale of shares.

Hence the only option not involved in the preparation of the statement of cash flows is computing the profit compared to the net increase or decrease in cash.