The statement of cash flows reports business activities on an accrual basis.Group startsTrue or False

Answer

The statement of cash flows reports business activities on a cash basis, not an accrual basis. Therefore, the statement you provided is False.

Explanation

1. Accrual Basis vs. Cash Basis: The accrual basis of accounting recognizes revenue when it is earned and expenses when they are incurred, regardless of when cash is exchanged. In contrast, the cash basis of accounting recognizes revenue and expenses only when cash is actually received or paid.

2. Purpose of the Statement of Cash Flows: The statement of cash flows primarily provides information about the cash inflows and outflows of a business over a specific period, helping assess liquidity and financial flexibility.

3. Components of Cash Flow Statement: It is divided into three main sections—operating activities, investing activities, and financing activities—each reflecting the cash effects of transactions.

Thus, since the statement of cash flows emphasizes cash transactions and not accrual accounting, the correct answer is False.