Question

When a spreadsheet for a statement of cash flows is prepared, all changes in noncash balance sheet accounts are fully explained on the spreadsheet. Explain how these noncash balance sheet accounts are used to fully account for cash flows on a spreadsheet

Short answer

While all non-cash balance sheet items are accounted for, it can be assumed that changes in cash are also fully accounted for.

Step-by-step solution

 Meaning of Statement of Cash Flow

Thecash inflows and outflows for a given accountingperiod are reported in the statement of cash flows, often known as the cash flow statement.

Explaining balance sheet

Off balance sheet alludes to those exercises of the company's resources, obligations, or financing liabilities that belong to the company's balance sheet but don't appear or show within the balance sheet. In other words, the activities that are not recorded within the balance sheet but have an effect on the company's financial strength are taken into thought by many investors amid the audit of the balance sheet as an entirety.

Step 3:Explain how these noncash balance sheet accounts are used to account for cash flows on a spreadsheet fully

It is possible to structure the balance sheet equation so that the algebraic sum of all noncash items equals cash. As a result, after all, adjustments to noncash balance sheet items are explained the same goes for changes to cash. We can be sure that the change in cash has been fully accounted for on the spreadsheet once all changes to noncash balance sheet items have been considered.

1. Assets = Liabilities + Equity
2. Cash + non-cashassets = Liabilities + Equity
3. Cash = Liabilities + Equity – Noncash assets
4. Changes in cash account = Changes in noncash accounts.