CH 23 Class Notes - CHAPTER 23 STATEMENT OF CASH FLOWS I....

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Unformatted text preview: CHAPTER 23 STATEMENT OF CASH FLOWS I. Statement of Cash Flows (SOCF) A. Presents information about cash flows that the other statements only provide indirectly B. Converts accrual basis net income to cash basis C. SFAS 95 Requirements: 1. Explain the change in cash and cash equivalents 2. Cash equivalents: Highly liquid investments that can be converted to cash in less than 3 months 3. II. Major Components A. Operating Activities (OA) : B. Investing Activities (IA) : C. Financing Activities (FA) : 1 D. Noncash Investing and Financing Activities 1. Reported as a supplement either narrative or schedule form 2. Examples: a. b. 3. Noncash transactions that do not affect assets or liabilities (i.e. stock dividend) are not reported III. Preparation Methods A. Direct Method 1. Reports components of cash flows from OA as gross receipts (i.e. customers) and gross payments (i.e. suppliers) 2. Requires a reconciliation of net income to cash flows from OA 3. FASB preferred method; however, it is not commonly used. B. Indirect Method 1. Adjusts accrual basis net income to cash basis cash flows from operating activities 2. C. Cash Flows from IA and FA are the same under both methods IV. Indirect Method Items Needed to Prepare Statement 2. Comparative Balance Sheet 3. Income Statement 4. Selected Transaction Data 2 B. Cash Flows from Operating Activities Net Income Adjustments to Reconcile Net Income to Net Cash Provided By (Used In) Operating Activities: 3 C. Cash Flows from Investing ActivitiesC....
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This note was uploaded on 07/26/2009 for the course ACCT AIM 4332 taught by Professor Tiffanybortz during the Summer '09 term at University of Texas at Dallas, Richardson.

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CH 23 Class Notes - CHAPTER 23 STATEMENT OF CASH FLOWS I....

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