Which of These Are Methods That Are Used to Prepare

question 5

Multiple Choice

Which of these are methods that are used to prepare a statement of cash flows?
i. Use information obtained directly from the primary records of cash transactions.
ii. Use the information in the accrual-based income statement and balance sheets but remove the effect of non-cash items.
iii. Use the information in the accrual-based income statement and balance sheets but add the effect of non-cash items.

• A) iii
• B) ii. iii
• C) i
• D) i. ii

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Definitions:

Cheques Outstanding

Cheques that have been written and recorded in the payer's accounting system but have not yet been cashed or cleared by the receiving bank.

Prepaid Expenses

Payments made for goods or services to be received in the future, treated as assets on a balance sheet until used.

Operating Expenses

All expenses incurred from a company's operational activities, excluding cost of goods sold, interest, and taxes.

Operating Activities

Cash flows directly related to earning income, including day-to-day transactions like selling products and paying wages.