To prepare the statement of cash flows requires analyzing changes in balance sheet accounts during the accounting period. As an outcome of correct double-entry recording of all transactions, the net change in cash will equal the net change in all noncash accounts.

Question

Quizplus · Accepted Answer

This is true. The statement of cash flows requires analyzing changes in balance sheet accounts during the accounting period to determine the net change in cash. This is because, under the double-entry accounting system, every transaction affects at least two accounts, one of which is a cash account. Therefore, the net change in all noncash accounts will be equal to the net change in cash.

To Prepare the Statement of Cash Flows Requires Analyzing Changes