accounting multiple choice question help?

Question

1.we issue a Statement Of Changes In Financial Position (SCFP) on working-capital basis. Would an account payable transaction be reflected as a source or use of working-capital?

a) All transactions paying an account payable affect cash.

b) This transaction would NOT be reflected in a cash-basis SCFP but is reflected in a working-capital basis SCFP.

c) Accounts payable transactions don't affect a SCFP, no matter if done on a cash-basis or a working-capital basis.

d) The transaction has no effect on working capital, since a current asset (cash) and a current liability (accounts payable) decrease by the same amount.

is it d?

Answer 1

The answer is D.Any transaction between a current asset & current liability does not affect working capital.

Non current asset & current asset as well as non current liability /asset with current asset /liabillity affect working capital(either increasing /decreasing working capital.
SCFP can be prepared based on non current assets as well as liabilities or only current assets & current liabilities.Increase/decrease of working capital is same in both the cases. One can do either way.

Answer 2

d

Answer 3

B