Question : Which of the following statements is false?
Option 1: Cash Flow Statement gives information relating to surplus or deficit of cash
Option 2: An enterprise, therefore, can decide about the Short-term Investments of the surplus and can arrange the Short-term Credit in case of deficit.
Option 3: A comparison of the actual cash flows with the budgeted cash flows of the year shows the extent to which Cash and Cash Equivalents were generated (sourced) and applied (used) as per the plan.
Option 4: None of the above
Correct Answer: None of the above
Solution : Answer = None of the above
The Cash Flow Statement provides information on the surplus or deficit of cash, enabling an enterprise to decide on short-term investments of surplus and arrange short-term credit in case of deficit. A comparison of actual cash flows with budgeted cash flows shows the extent to which Cash and Cash Equivalents were generated and applied as per the plan. Hence, the correct option is 4.
Question : Short-term investments are considered as Cash and Cash Equivalent. Hence, they do not affect cash flows and are therefore not considered while preparing cash flow statements.
Question : Which of the following statements is true?
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