Question

Which of the following statements are correct (Select all that apply):

Select one or more:

A. An income statement reports on financing activities.

B. A balance sheet reports on investing and financing activities.

C. The statement of cash flows reports on cash flows from operating, investing, and financing activities over a period of time.

D. A balance sheet reports on a company's assets and liabilities over a period of time.

E. The statement of equity reports on changes in the accounts that make up equity

Answer 1

From the given statements, the statement C and E are correct due to the reasons mentioned as follows:-

A) An Income Statement reports on financing activities : It is False because an income statement does not report financing activities rather it shows the income and expenditure of the organisation and the net income of the year from all the activities.

B) A balance Sheet reports on investing and financing activities : It is False because a balance sheet shows the assets and liabilities & capital  of the organisation at a particular point of time.

C)The statement of cash flows reports on cash flows from operating, investing, and financing activities over a period of time: It is True because Cash flow statement shows the net cash flow from all the activities like Operating, Investing and Financing. It shows how change in all these activities affect cash and cash equivalents.

D) A balance sheet reports on a company's assets and liabilities over a period of time: It is False because a balance sheet shows assets & liabilities at a point of time not over a period of time that is why we write "as on date" at the top of the balance sheet.

E)The statement of equity reports on changes in the accounts that make up equity : This is True because in the Statement of Equity we report changes in retained earnings and common stock which make up equity shareholders' funds.