The Information in Statement of Cash flOws Should Help Investors

question 60

Multiple Choice

The information in statement of cash flows should help investors and creditors evaluate:

• A) the company's ability to generate past cash flows.
• B) the company's ability to receive dividends and meet shareholder obligations
• C) the reasons for the difference between net liabilities and net cash provided or used by operating activities.
• D) the investing and financing transactions during the period.

Knowledge of reversing entries and their purposes.

Understand the function of control accounts and subsidiary ledgers.

Understand the process of recording closing and reversing entries.

Grasp the basics of the income statement preparation and its components.

---

Definitions:

Adjusted Trial Balance

a listing of all company accounts that will appear in the financial statements after adjustments have been made for errors, omissions, and accruals.

Adjusting Entries

They are adjustments made in journal accounts to record expenses and revenues that have accrued but not yet been recorded through standard accounting transactions.

Vertical Analysis

A financial statement analysis method where each entry for each of the three major categories (assets, liabilities, and equity) is represented as a proportion of total value.

Financial Statement

A formal record of the financial activities and position of a business, individual, or other entity, typically comprising the balance sheet, income statement, and cash flow statement.