AN, 2014) LTIPLE CHOICE. Choose the one alternative that best completes the 1) A

Question

AN, 2014) LTIPLE CHOICE. Choose the one alternative that best completes the 1) A business's cash receipts and cash payments for a specific A) cash reconciliation statement C) balance sheet. statement or answers the qpestion. period are reported on ap 2) Which of the following statements accurately descrbes the tatement cf cash Sow B) cash flow statement D) Income statement A) It shows the link between accrual based income and the cash reported on the balance sheet. B) It shows the link between book income and eamings per share. C) It shows the relative proportion of debt and assets D) It indicates when long-term debt will mature. 3) Which of the following descrbes theerating aivties d h A) It includes cash transactions affecting the capitalization of the busines B) It includes cash transactions that essentially increase or decrease the long-te business. C) It includes cash transactions that primarily affect current assets and current liabilities. D) It shows the beginning and ending balances of cash. assets of a 4) Which of the following statements is true of the direct and indirect methods of preparing the statement of cash flows? A) The direct method begins with Net Income and adjusts to calculate operating and investing cash flows B) The indirect method shows three types of cash lows, bat the direct method does not. C) The operating activities section of both the direct and the indirect methods are the same D) The indirect method and the direct method will prodace t the same amount of net cash flow from operating activities. 5) The purchase of equipment financed by a Long-Term Notes Payable is an example of A) investing activity B) financing activity. C) operating activity. D) non-cash investing and financing activity B) investing operating, financing A) operating, financing investing C) financing, investing, operating 6) Which of the following is the typical order of the sections on a statement of cash flows? D) operating, investing, financing the statement of cash flows include activities that create revenue7) 7) Which of the following sections of and expenses of the businessi A) the financing section B) the operating section C) the investing section D) the non-cash investing and financing section

Explanation / Answer

Answers

Since, business transactions are recorded using accrual concept, cash flow statement is all about cash receipt and cash payments and it shows the link between accrual based income and cash receipt on balance sheet.

Under Operating activity section only, the changes in the working capital or current asset and current liabilities are reflected.

No matter if the direct method is being used or the indirect method is being used in determining cash flows from operating activities, the end result will always be the same which means both provide same cash flows from operating activities.

Since the transaction don’t involve any ‘’cash’’ element, it is an example of non-cash investing & financing activities

Current Order is Operating Activities, then Investing activities and then finally Financing activities.

Operating Activities section , as the name suggest, includes cash flows from business operating activities that involve revenue and expenses.

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