Question : Cash Flow Statement by Indirect Method is prepared on the basis of ___________.
Option 1: Balance sheet
Option 2: Profit and loss account
Option 3: Both 1 and 2
Option 4: None of the above
Correct Answer: Both 1 and 2
Solution : Answer = Both 1 and 2
Cash flow statement by indirect method Is prepared from the financial statements. i.e. balance sheet and statement of profit and loss. This method involves adjusting net income for non-cash items and changes in working capital to determine cash flows from operating activities. Hence, the correct option is 3.
Question : Cash Flow Statement is historical in nature because it is prepared on the basis of Profit and Loss Account and Balance Sheet, which is based on past transactions.
Question : The accounting standard prescribes that Cash Flow Statement be prepared either by
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