Question

In: Accounting

The statement of cash flows must be prepared before the balance sheet is prepared. True False

  1. The statement of cash flows must be prepared before the balance sheet is prepared.

    1. True

    2. False

Solutions

Expert Solution

False.

We know that there are mainly four components of financial statement which includes an income statement, statement of retained earnings, balance sheet and cash flow statement.

We know that these are prepared at the end of period. Cash flow statement is the summary of cash outflows and inflows from operating, investing and financing activities.

The order of preparing financial statements is,

1. Income statement.

2. Statement of retained earnings.

3. Balance sheet.

4. Cash flow statement.

So fr the above it is clear that cash flow statement is prepared last. So cash flow statement are not prepared before the balance sheet.

Hence, the given statement is false.

SUMMARY :

Out of the all financial statements, cash flow statement is an important one which is prepared last. So it is not prepared before the balance sheets are prepared.

Hence given statement is false.

ekkarill92 answered 2 years ago
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