ACCA Applied Knowledge · Business and Technology · Financial information provided by business
During the year, Kora Co's cash balance rose, yet it reported a loss in its statement of profit or loss. Which statement is most useful for explaining how the business generated and used cash despite the loss?
The statement of cash flows is most useful because it shows the cash generated and used in operating, investing and financing activities. It explains why cash can rise despite a loss, for example through borrowing or asset sales, which the other options do not show.
- AStatement of changes in equity
- BStatement of cash flowsCorrect
- CNotes on accounting policies
Explanation
The statement of cash flows reconciles cash movements and classifies them into operating, investing and financing activities. The statement of changes in equity shows movements in equity components, not the sources and uses of cash. Accounting policy notes do not explain cash movements.
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