Question

The statement of cash flows A. must be prepared on a daily basis. B. summarizes the operating, financing, and investing activities of an entity. C. is a special section of the income statement. D. is another name for the income statement.

Answer 1

Answer: Option B

Explanation: Cash flow statement can be defined as the financial statement that is used to analyze the sources and uses of cash in a single year time period.

In a cash flow statement all transactions affecting cash balance are categorized into three categories.

1. Operating activities are those activities which are related to the core activities of business.

2. Investing activities are those activities which are related to procurement or sale of fixed assets.

2. Financing activities relates to those activities of the business which are related to procurement of funds for the purpose of financing business operations.