Statement of Cash Flows
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Statement of Cash Flows Quiz
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Question 1 of 10
1. Question
Which of the following is true regarding the statement of cash flows:
Correct
The statement of cash flows may be prepared using the direct or indirect method
Incorrect
The answer is Reports changes in cash between accounting periods – The statement of cash flows may be prepared using the direct or indirect method
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Question 2 of 10
2. Question
The indirect method of cash flows preparation uses account changes found in which financial statement?
Correct
The indirect method reconciles beginning and ending period cash using asset, liability, and equity accounts
Incorrect
The answer is Balance sheet – The indirect method reconciles beginning and ending period cash using asset, liability, and equity accounts
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Question 3 of 10
3. Question
Which of the following methods is the most common way to prepare the statement of cash flows?
Correct
The indirect method reconciles beginning and ending period cash using asset, liability, and equity accounts
Incorrect
The answer is Indirect method – The indirect method reconciles beginning and ending period cash using asset, liability, and equity accounts
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Question 4 of 10
4. Question
What type of activities may be covered on the statement of cash flows?
Correct
The statement of cash flows consists of operating, investing, and financing activities with the possible addition of supplemental information
Incorrect
The answer is All of the above – The statement of cash flows consists of operating, investing, and financing activities with the possible addition of supplemental information
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Question 5 of 10
5. Question
What section of the cash flow statement would you find a purchase of manufacturing equipment?
Correct
Common investing items on the cash flow statement include change in: property, plant, and equipment
Incorrect
The answer is Investing – Common investing items on the cash flow statement include change in: property, plant, and equipment
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Question 6 of 10
6. Question
Would the following be an add back or decrease to net income or loss on the cash flow statement: Increase in prepaid expense
Correct
An increase in prepaids involve cash out, so the transaction would contribute to a decrease on the cash flow statement (appears in the operating section)
Incorrect
The answer is Decrease – An increase in prepaids involve cash out, so the transaction would contribute to a decrease on the cash flow statement (appears in the operating section)
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Question 7 of 10
7. Question
What type of stakeholder may be particularly interested in the statement of cash flows?
Correct
Investors are particularly interested in the statement of cash flows to analyze the quality of company earnings and other factors that may otherwise not be known using the balance sheet and income statement alone
Incorrect
The answer is Investor – Investors are particularly interested in the statement of cash flows to analyze the quality of company earnings and other factors that may otherwise not be known using the balance sheet and income statement alone
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Question 8 of 10
8. Question
How is the cash flow statement and comparative balance sheet related?
Correct
A comparative balance sheet shows prior period and current ending period cash, the same balances that are reconciled in the statement of cash flows, which also utilizes the current period net income or loss
Incorrect
The answer is Beginning and ending cash – A comparative balance sheet shows prior period and current ending period cash, the same balances that are reconciled in the statement of cash flows, which also utilizes the current period net income or loss
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Question 9 of 10
9. Question
What is a common operating add back to net income found on the cash flow statement because it is a non-cash expense?
Correct
Depreciation is a non-cash expense and is therefore an add back to net income on the operating section of the cash flow statement, because no cash was actually used in the initial expense on the income statement
Incorrect
The answer is Depreciation – Depreciation is a non-cash expense and is therefore an add back to net income on the operating section of the cash flow statement, because no cash was actually used in the initial expense on the income statement
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Question 10 of 10
10. Question
What is fundamental to understanding the cash flow statement?
Correct
The cash flow statement is heavily motivated by cash versus non-cash transactions which are a distinct feature of accrual accounting
Incorrect
The answer is Cash versus non-cash transactions – The cash flow statement is heavily motivated by cash versus non-cash transactions which are a distinct feature of accrual accounting
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