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mediumMCQCUET Accountancy 2022 8 Aug Shift 22026Accountancy
1 mark

Which one of the following statement is false?

  1. A
    Cash flow statement is based upon cash basis of accounting.
  2. B
    Cash flow statement is based upon accrual basis of accounting.
  3. C
    Increase in the amount of creditors is a source of cash in cash flow statement.
  4. D
    Increase in the amount of debtors results in decrease in cash in cash flow statements.

Solution & Step-by-step Explanation

The cash flow statement is fundamentally built on the cash basis of accounting (tracking actual cash inflows and outflows), not the accrual basis. Therefore, saying it is based upon accrual basis is false.

Practice this question

Try it yourself before checking the explanation above.

Which one of the following statement is false?
A
Cash flow statement is based upon cash basis of accounting.
B
Cash flow statement is based upon accrual basis of accounting.
C
Increase in the amount of creditors is a source of cash in cash flow statement.
D
Increase in the amount of debtors results in decrease in cash in cash flow statements.

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Financial StatementsCash Flow

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