Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 12 - Statement of Cash Flows - Questions: 16

Answer

a)CASH FLOW STATEMENT b)INDRECT METHOD c)DEPRICIATION d)HOW IT IS RECORDED

Work Step by Step

a) It is the statement which shows the inflow & out flow of cash within an organization. It is basically of three parts - Cash from operating activity - Cash flow from investing activity - Cash flow from financing activity In order to survive, the ability of a company to make profit is not enough, it also important for a company to generate sufficient cash for its survive. This can be ascertain by the cash flow statement. b) Under this method of calculating, cash flow from operating activities, all the required figures are calculated by employing information contained in the profit & loss account and Balance sheet. This method does not use information contained within the accounting records. c) It is the reduction in value of fixed asset due to the regular wear and tear of machine. It's a non cash expense. d) While preparing cash flow statement all the non cash expenses are added back to the net income as per profit & loss account so depreciation provided during the year is added back to the net income.
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