When Preparing the Note Attached to the Statement of Cash

question 9

Multiple Choice

When preparing the note attached to the statement of cash flows reconciling operating profit with cash flow from operations, which statement is not true?

• A)An increase in current assets is deducted from profit.
• B)A decrease current assets is added to profit.
• C)An increase in current liabilities is deducted from profit.
• D)All of the above are true.

---

Definitions:

Rising prices

A situation in an economy where the general level of prices for goods and services is increasing over a period of time.

Inventory method

A system used by companies to keep track of the quantity and cost of inventory on hand and sold, including methods like FIFO (First In, First Out) and LIFO (Last In, First Out).

Average cost method

An inventory costing method that assigns the average cost of all similar items to the cost of goods sold and to ending inventory.

Periodic system

An inventory accounting system that updates inventory balance and cost of goods sold at the end of an accounting period.