The first step in the preparation of the statement of cash flows requires the use of information included in which comparative financial statements?
A) Statements of cash flows
B) Balance sheets
C) Income statements
D) Statements of retained earnings

Question

Quizplus · Accepted Answer

The first step in the preparation of the statement of cash flows requires the use of information included in the comparative balance sheets to identify the changes in the company's cash and cash equivalents during the period. This step involves calculating the differences between the beginning and ending balances of various asset and liability accounts, which are needed to determine the net increase or decrease in cash. Therefore, the balance sheets provide the most relevant information for preparing the statement of cash flows.

The First Step in the Preparation of the Statement of Cash