College Accounting, Chapters 1-15, Loose-Leaf Version
22nd Edition
ISBN: 9781305667631
Author: James A. Heintz, Robert W. Parry
Publisher: South-Western College Pub
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Question
Chapter 6A, Problem 1RQ
To determine
Explain the purposes of the statement of cash flows.
Expert Solution & Answer
Explanation of Solution
Statement of cash flows: Statement of cash flow is a financial statement that shows the cash and cash equivalents of a company for a particular period of time. It shows the net changes in cash, by reporting the sources and uses of cash as a result of operating, investing, and financing activities of a company.
Purpose of the statement of cash flows:
- The primary purpose of the statement of cash flows is to provide information about the
cash inflows andcash outflows of an organization. - To determine the ability of the business to pay dividend and settle debts.
- Statement of cash flows distinguishes among the operating activities, investing activities and financing activities.
- Cash flows from operating activity provide information which is helpful in estimating future profitability, liquidity, and long term solvency.
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Chapter 6A Solutions
College Accounting, Chapters 1-15, Loose-Leaf Version
Ch. 6A - Prob. 1RQCh. 6A - Prob. 2RQCh. 6A - SERIES A EXERCISE CLASSIFYING BUSINESS...Ch. 6A - SERIES A EXERCISE CLASSIFYING BUSINESS...Ch. 6A - SERIES B EXERCISE CLASSIFYING BUSINESS...Ch. 6A - SERIES B EXERCISE CLASSIFYING BUSINESS...Ch. 6A - COMPREHENSIVE PROBLEM 1: The Accounting Cycle Bob...Ch. 6A - Comprehensive Problem 1, Period 2: The Accounting...
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- Explain the purpose of the statement of cash flows and why this statement is needed.arrow_forwardWhat categories of activities are reported on the statement of cash flows? Does it matter in what order these sections are presented?arrow_forwardProvide the missing piece of information for the following statement of cash flows puzzle.arrow_forward
- Explain the difference between the two methods used to prepare the operating section of the statement of cash flows. How do the results of these two approaches compare?arrow_forwardWhen preparing the operating section of the statement of cash flows, using the indirect method, how must gains and losses be handled? Why?arrow_forward
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