Statement of Cash Flows: Preparation, Presentation, and Use

Chapter 1STATEMENT OF CASH FLOWS SUMMARY OF PRESENTATION REQUIREMENTS

This chapter provides a brief summary of the major requirements relating to the statement of cash flows. You will work with these fundamental requirements and then prepare an illustrative statement of cash flows. This introduction to the reporting requirements sets the stage for a careful review of technical reporting and disclosure requirements and several problem areas. There are many areas where professional judgment influences cash flow reporting decisions.

Requirements for the statement of cash flows discussed throughout the course rely on the guidance in FASB Accounting Standards Codification (ASC) 230, Statement of Cash Flows.

LEARNING OBJECTIVES

After completing this chapter, you should be able to do the following:

•    Recall the fundamental cash flow reporting requirements.

•    Identify general financing, investing, and operating inflows and outflows as well as noncash transactions.

•    Identify characteristics of the direct and indirect methods of presenting cash from operations.

•    Estimate direct method operating cash inflows and outflows from given financial data.

•    Recall how to prepare a statement of cash flows using both the direct and indirect method of presenting operating information.

What Is a Statement of Cash Flows?

The statement of cash flows is a classified listing of the cash inflows and outflows of a reporting entity during a period.

The statement of cash flows

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