A note to the accounts reconciling cash flows from operating activities to net profit is required because:
A) Complex calculations are required to convert cash based revenues.
B) Items such as depreciation are only recorded in a cash system and not an accrual system.
C) There is likely to be a disparity between cash from operations under AASB 107 and the profits reported in the income statement.
D) The direct method is required under AASB 107.
E) None of the given answers.

Question

Quizplus · Accepted Answer

Cash flows from operating activities may not directly reflect the net profit reported in the income statement due to differences between cash and accrual accounting. Therefore, a note is required to explain any disparities between the two figures.

A Note to the Accounts Reconciling Cash Flows from Operating