Loose Leaf for Financial Accounting: Information for Decisions
Loose Leaf for Financial Accounting: Information for Decisions
9th Edition
ISBN: 9781260158762
Author: John J Wild
Publisher: McGraw-Hill Education
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Chapter 12, Problem 2BTN
Summary Introduction

Introduction:

Cash Flow Statement: Cash flow statement tells company about the inflow and outflow of the cash into the business. From cash flow it is easier to find out the liquidity of the business. For a normal person cash flow is more important than the income statement.

To Give:

Half page memorandum on importance of cash flow statement.

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Your friend, Diana Wood, recently completed the second year of her business and just received annual financial statements from her accountant. Wood finds the income statement and balance sheet informative but does not understand the statement of cash flows. She says the first section is especially confusing because it contains a lot of additions and subtractions that do not make sense to her. Wood adds, “The income statement tells me the business is more profitable than last year and that’s most important. If I want to know how cash changes, I can look at comparative balance sheets.” Required Write a half-page memorandum to your friend explaining the purpose of the statement of cash flows. Speculate as to why the first section is so confusing and how it might be rectified.
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Loose Leaf for Financial Accounting: Information for Decisions

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