Question

bobby wants to get a better understanding of cash that is coming in and out of his business. which financial statement is the best for bobby to review?

cash flow statement

tax record of assessment

profit and loss statement

the balance sheet

Answer 1

ANS : CASH FLOW STATEMENT

Cash flow statement is a financial statement, which is prepared to know the cash inflows and outflows of a business. It gives important insights to the change in cash positions across period. It is also known as statement of cash flow, presents the inflow and outflow of cash in the different activities of the business, the net increase or decrease in cash and the resulting cash balance at the end of the period. Under the preparation of such accounts, cash inflow will be fall under the head receipts, whereas; cash outflows fall under the head payments. Cash flow statement shows the movement of cash account in the company, also such movements/ activities are divided in to three as :

1. operating activities
2. investing activities &
3. financing activities

- profit and loss account is prepared to know the profit/loss of the business during current year, and also to describe how the profit/loss arose

- tax assessment record is prepared to , keep a correct record of tax payment, and for the purpose of tax return preparation

- balancesheet is prepared to know the financial position of a business. It provides financial status of a company at any specific point of time to the multiple stakeholders or to the potential stakeholders.