Why do businesses need the fourth statement - Statement of Cash Flows? Demonstra
ID: 2593614 • Letter: W
Question
Why do businesses need the fourth statement - Statement of Cash Flows? Demonstrate your understanding of the Statement of Cash Flows -- What is the reporting purpose, what questions that this statement answer for users of statements. What are some examples of investing activities, financing activities, noncash investing and financing activities? How are the Income Statement and Balance Sheet used to create the Statement of Cash Flows? DO NOT GIVE ME A COPY OF INTERNET POSTING. EXPLAIN YOUR KNOWLEDGE OF THE STATEMENT.
Explanation / Answer
understanding of the Statement of Cash Flows Cash flow used for understadning movement of cash . We can see how much cash generated from operating activity , how much from financing and investing activity . The cash can be used as well in investmnets , or can be used in repayment of debts , or can be used in purchases payment or expneses payments What is the reporting purpose, Since balance sheet and profit loss account do not show the cash movement that is why this statement is prepared and preseted to investors to show how and where cash is used or generated investing activities, financing activities, noncash investing and financing activities Investing activity - like investment made in stocks of other company , investment made in land , building , plant machinary financing activity - repayment of debts , new bank loan taken non cash activity - depreciation ,m amortization How are the Income Statement and Balance Sheet used to create the Statement of Cash Flows firstly we taken profit after tax from income tax statement then add back non cash items , then we take changes in balance sheet items like new bank loan availed ,m new investment made etc and prepare cash flow investment for cash flow prepation ,m we have two method first is direct method and another is indirect method .
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.