Question

How does the balance sheet differ from the statement of cash flows in regards to reporting a company's financial information related to cash?

A) The balance sheet reports the cash amount over a period of time, and the statement of cash
B) The balance sheet reports the cash amount at a single point in time, and the statement of flows reports how cash was used at a single point in time cash flows reports how cash is used over a period of time.
C) The balance sheet reports how the company plans to use available cash balances, and the statement of cash flows reports how cash is used over a period of time.
D) The balance sheet reports the cash amount at a single point in time, and the statement of cash flows reports how the company plans to use available cash balances.

Answer 1

The balance sheet reports the company's cash amount at a specific point in time, while the statement of cash flows shows the changes in cash over a period through operating, investing, and financing activities.The correct Answer is option B)

Step-by-step explanation:

The balance sheet and the statement of cash flows are two fundamental financial statements used to report a company's financial position, but they serve different purposes and present different types of information. Answer B is correct.

The balance sheet reports the amount of cash at a single point in time, often at the end of a fiscal quarter or year. This snapshot includes the cash within current assets along with other assets such as inventory, property, and equipment minus all liabilities, reflecting the company's net worth at that specific time.

In contrast, the statement of cash flows details how cash is used over a period of time, such as a fiscal quarter or year, showing the inflows and outflows from operating activities, investing activities, and financing activities.

This provides a dynamic view of how the company is generating and using cash, enabling stakeholders to understand the company's cash position over time.