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The statement of _______ may be prepared under the direct or indirect method.
- a)Cash Flow
- b)Balance sheet
- c)Fund flow
- d)Income statement
Correct answer is option 'A'. Can you explain this answer?
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The statement of_______ may be prepared under the direct or indirect m...
Statement of Cash Flow and its Preparation Methods
The statement of cash flow is a financial statement that shows the inflows and outflows of cash and cash equivalents during a particular accounting period. This statement is prepared to provide information about the company's ability to generate cash and its use of cash over a specific period. The statement of cash flow can be prepared under two methods, which are the direct method and the indirect method.
Direct Method
The direct method is a method of preparing the statement of cash flow that shows the actual cash inflows and outflows during an accounting period. Under this method, all cash receipts are listed and totaled, and all cash payments are listed and totaled. The difference between the total cash receipts and the total cash payments shows the net increase or decrease in cash during the accounting period. This method is more detailed and provides a better understanding of the company's cash position.
Indirect Method
The indirect method is a method of preparing the statement of cash flow that starts with the net income reported in the income statement and then makes adjustments for non-cash transactions and changes in working capital accounts. Under this method, the net income figure is adjusted for any non-cash expenses, such as depreciation and amortization. Additionally, changes in working capital accounts, such as accounts receivable, accounts payable, and inventory, are adjusted to show their effect on cash flows. The net result of these adjustments is the net increase or decrease in cash during the accounting period.
Conclusion
In conclusion, the statement of cash flow is an important financial statement that shows the cash inflows and outflows of a company during a particular period. The statement of cash flow can be prepared under two methods, which are the direct method and the indirect method. The direct method shows the actual cash inflows and outflows, while the indirect method starts with the net income reported in the income statement and makes adjustments for non-cash transactions and changes in working capital accounts. Both methods provide valuable information about the company's cash position and help stakeholders make informed decisions.
The statement of cash flow is a financial statement that shows the inflows and outflows of cash and cash equivalents during a particular accounting period. This statement is prepared to provide information about the company's ability to generate cash and its use of cash over a specific period. The statement of cash flow can be prepared under two methods, which are the direct method and the indirect method.
Direct Method
The direct method is a method of preparing the statement of cash flow that shows the actual cash inflows and outflows during an accounting period. Under this method, all cash receipts are listed and totaled, and all cash payments are listed and totaled. The difference between the total cash receipts and the total cash payments shows the net increase or decrease in cash during the accounting period. This method is more detailed and provides a better understanding of the company's cash position.
Indirect Method
The indirect method is a method of preparing the statement of cash flow that starts with the net income reported in the income statement and then makes adjustments for non-cash transactions and changes in working capital accounts. Under this method, the net income figure is adjusted for any non-cash expenses, such as depreciation and amortization. Additionally, changes in working capital accounts, such as accounts receivable, accounts payable, and inventory, are adjusted to show their effect on cash flows. The net result of these adjustments is the net increase or decrease in cash during the accounting period.
Conclusion
In conclusion, the statement of cash flow is an important financial statement that shows the cash inflows and outflows of a company during a particular period. The statement of cash flow can be prepared under two methods, which are the direct method and the indirect method. The direct method shows the actual cash inflows and outflows, while the indirect method starts with the net income reported in the income statement and makes adjustments for non-cash transactions and changes in working capital accounts. Both methods provide valuable information about the company's cash position and help stakeholders make informed decisions.
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The statement of_______ may be prepared under the direct or indirect m...
Cash either can be prepaid directly without taking other accounts in concern or indirectly i.e by finding cash flow form different activities.
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The statement of_______ may be prepared under the direct or indirect method.a)Cash Flowb)Balance sheetc)Fund flowd)Income statementCorrect answer is option 'A'. Can you explain this answer? for Commerce 2025 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about The statement of_______ may be prepared under the direct or indirect method.a)Cash Flowb)Balance sheetc)Fund flowd)Income statementCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for Commerce 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The statement of_______ may be prepared under the direct or indirect method.a)Cash Flowb)Balance sheetc)Fund flowd)Income statementCorrect answer is option 'A'. Can you explain this answer?.
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