Question

regarding the use of a spreadsheet for the preparation of the statement of cash flows, which of the following statements is incorrect? a. when companies face complex situations, a spreadsheet can help in preparing the statement of cash flows b. the spreadsheet cannot be used for the direct method c. accountants can prepare the statement of cash flows directly from the lower part of the spreadsheet d. the spreadsheet starts with the beginning balance sheet and concludes with the ending balance sheet

Explanation:

To determine the incorrect statement, we analyze each option:

• Option A: In complex situations, spreadsheets assist in cash flow statement preparation. This is correct as spreadsheets organize data for complex transactions.
• Option B: Spreadsheets can be used for both direct and indirect methods of cash flow statement preparation. So stating it "cannot be used for the direct method" is incorrect.
• Option C: Accountants can prepare the cash flow statement from the lower part of the spreadsheet (where cash flow details are often summarized), which is a valid approach.
• Option D: The spreadsheet for cash flow preparation typically starts with the beginning balance sheet and ends with the ending balance sheet, reconciling changes, so this is correct.

Answer:

B. The spreadsheet cannot be used for the direct method