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in the bpp questions one of the disadvantages of statement of chas flows is that – there is an opportunity to reclassify some cash outflows that might have been reported in the operating section as investing vash flows.
i didnt understand what we mean by this exactly
Tell me which question in the BPP Revision Kit that you are referring to.
It is a bit of a strange question (but all the other choices are not valid, and so this has to be the correct answer 🙂 )
The example that BPP give in the answer explains it. Think about research expenditure. It appears in the Statement of profit or loss as an expense and therefore reduces the profit, which is part of the operating cash flows. What could happen is that instead of showing it in operating cash flows they might move it and show it under cash flows from investing activities instead. That should not happen, which is what does make it a rather strange question.
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