Which of the Following Is Not True with Regard to the Preparation

question 22

Multiple Choice

Which of the following is not true with regard to the preparation of a cash flow statement?

• A) Cash flows are categorized by operating, investing, and financing activities.
• B) The changes in all income statement accounts are calculated and then listed as cash inflows or outflows.
• C) The direct method or the indirect method may be used to prepare the statement of cash flows.
• D) The changes in all of the balance sheet accounts are calculated and then listed as inflows or outflows, except for cash.

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Definitions:

Preference Shares

Shares that give holders a priority over common stockholders in terms of receiving dividends and assets in the event of a liquidation, often without voting rights.

Interest Expense

The cost incurred by an entity for borrowed funds, reflected on the income statement as a charge against earnings.

Stock Options

Financial instruments that give the holder the right, but not the obligation, to buy or sell a stock at a predetermined price within a specific time frame.

Owners' Interests

The equity interest held by shareholders in a corporation, reflecting their claim on the company's assets and earnings.