• DUE DATE: Week 10 Wednesday 16 October, 5pm
• SUBMISSION: Submit an electronic copy of the assignment through Turnitin by the due date AND a printed copy in class at your registered workshop.
• WEIGHTING: 20% of the final mark.
PART A (MAX 700 words)
You are the accountant for a large proprietary company and have advised the CEO that to comply with accounting standards, the company is required to prepare a statement of cash flows. The CEO questions the usefulness of the statement as he has stated that all he needs to know is if the company, has made a profit. On the preparation of the cashflow statement it revealed a poor cash position whereas the income statement was showing a profitable result for the year. The CEO restated his opinion that the cash flow statement did not give a good indication of the activities of the company.
Prepare a response to the CEO discussing the purpose and usefulness of the cashflow statement and why it can report a negative cash flow position while the company is making a profit. (10 Marks)