The primary purpose of the statement of cash flows is to:
A) provide information about the profit or loss during the accounting period.
B) provide information about the cash receipts and cash payments made during the accounting period.
C) show the deficit of cash during the period.
D) show the cash balance at the end of the period.

Question

Quizplus · Accepted Answer

The statement of cash flows shows the inflows and outflows of cash during the accounting period, providing information about the cash receipts and cash payments made by the company. It is an important tool for assessing a company's liquidity and ability to meet its financial obligations. While the statement of cash flows may indirectly provide information about profit or loss, this is not its primary purpose. Likewise, while the statement shows the cash balance at the end of the period, this is not its primary focus. The statement is concerned with the flows of cash during the period, rather than the ending balance.

The Primary Purpose of the Statement of Cash Flows Is