Statement 1: The cash basis is appropriate for some smaller entities
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- Match the following assertions with their associated description: (a) existence/occurrence, (b) completeness. (c) rights and obligations, (d) valuation or allocation, (e) presentation and disclosure. 1. Cash accounts arc properly classified on the balance sheet and disclosed in the notes to the financial statements. 2. Cash balances exist at the balance sheet date. 3. The recorded balances reflect the true underlying economic value of those assets. 4. The company has title to the cash accounts as of the balance sheet date. 5. Cash balances include all cash transactions that have taken place during the period.True/False The purpose of the statement of cash flows is to provide information about total revenue and expenses.Under the cash basis of accounting, which of the following statements is true? a. Revenue is recorded when it is earned, regardless of when the cash is received. b. Expenses are recorded when they are paid. c. Expenses are recorded when they are incurred, regardless of when the cash is paid. d. The cash basis of accounting is allowed for all corporations.
- Which of the following sentences regarding the statement of cash flows is false? The statement of cash flows describes the companys cash receipts and cash payments for a period of time. The statement of cash flows reconciles the beginning and ending cash balances shown on the balance sheet. The statement of cash flows reports cash flows in three categories: cash flows from business activities, cash flows from investing activities, and cash flows from financing activities. The statement of cash flows may be used by creditors to asses the creditworthiness of a company.Which of these transactions would not be part of the cash flows from the operating activities section of the statement of cash flows? A. credit purchase of inventory B. sales of product, for cash C. cash paid for purchase of equipment D. salary payments to employees1. Which of the following will not be classified under operating activities in a cash flow statements?a. Cash receipts from sale of goods or rendering of services.b. Cash receipts from sale of equity and debt instruments of other entities held primarily for the purpose of being traded.c. Cash receipts from sale of equity instruments representing interests in joint ventures.d. Cash payments to employees for short-term employee benefits. 2. Which of the following is a correct computation of cash flows from operation using the indirect method? a. Profit less depreciation expense, add increase in accounts receivable, less increase in accounts payable. b. Profit less depreciation expense, add decrease in accounts receivable, deduct increase in accounts payable. c. Profit add depreciation expense, add decrease in accounts receivable, deduct increase in accounts payable. d. Profit add depreciation expense, add decrease in accounts receivable, less decrease in…
- 1. According to PAS 7, which of the following statement is incorrect? * a. Statement of Cash Flows requires an entity to present a statement of cash flows as an integral part of its primary financial statements b. Investing and financing transactions which do not require the use of cash should be excluded from the statement of cash flows, but they should be separately disclosed elsewhere in the financial statements c. Cash flows under operating activities are classified and presented either using the 'direct' or 'indirect' method d. None. All of the above statements are correctWhich one of the following is NOT an example of cash flows in operating activities according to direct method? Select one: a. Cash received from debtors b. Cash sales of goods and services c. Adding back depreciation expense d. Cash payment for purchase of inventoriesHi! Can you please help me answer these three short questions? Please do. Thank you. Which of the following is presented under the investing activities section of a statement of cash flows? a. Purchase of equipment on account. b. Additional investment in debt securities. c. Issuance of additional shares of stock. d. Cash sales. Noncash items, such as depreciation expense, must be added to net income to arrive at net cash provided by (used in) operating activities when the indirect method is used. a. True b. False The standards does not provide definitive guidance in distinguishing material information from immaterial information, so it is necessary to exercise judgment in deciding if a transaction is material. a. True b. False
- Which of the following is incorrect about the statement of cash flows?a. It is the third basic financial statement.b. It provides information about cash receipts and cash payments of an entity during a period.c. It reconciles the ending cash account balance to the balance as per the bank statement.d. It provides information about the operating, investing and financing activities of the business.TRUE OR FALSE 1. Cash flows are presented in the statement of cash flows into four activities. 2. Non-financial institutions have the option of classifying interest income received as either investing activities of operating activities. 3. Cash flows relating to income and expenses are normally classified as investing activities in the statement of cash flows. 4. Only transactions that have affected cash and cash equivalents are included in the statement of cash flows. Non-cash transactions are excluded and disdosed only. 5. According to PAS 7, the indirect method of presenting cash flows relating to operating activities shows each major dass of gross cash receipts and gross cash payments.Which of the following statements is correct relating to preparation of statement of cash flows? A. Statement of cash flows is prepared according to cash basis of accounting. B. Statement of cash flows must only be prepared using the indirect method. C. Statement of cash flows shows only the investing activities of a business. D. Partnerships are not allowed to prepare a statement of cash flows. E. Statement of cash flows is prepared according to the accrual basis of accounting.
