CS Executive · Corporate Accounting and Financial Management · Cash Flows
Which statement about the purpose of classifying cash flows by activity under Ind AS 7 is correct?
Classification by activity under Ind AS 7 allows users to assess the impact of operating, investing and financing activities on the entity's financial position and its cash and cash equivalents, and to evaluate relationships among those activities. It does not compute tax or replace the balance sheet.
- AIt lets users assess the impact of activities on financial position and cash, and evaluate relationships among themCorrect
- BIt is meant only to compute income tax payable
- CIt replaces the need for a balance sheet
- DIt is meant to show only the entity's profit for the year
Explanation
Paragraph 11 states that classification by activity gives information allowing users to assess the impact of those activities on financial position and on cash and cash equivalents. It may also be used to evaluate relationships among activities. The other options attribute purposes the text does not give.
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