Chapter 23

Chapter 23 - 1. Describe the purpose of the statement of...

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Unformatted text preview: 1. Describe the purpose of the statement of cash flows. 2. Identify the major classifications of cash flows. 3. Differentiate between net income and net cash flow from operating activities. 4. Contrast the direct and indirect methods of calculating net cash flow from operating activities. 5. Determine net cash flows from investing and financing activities. 6. Prepare a statement of cash flows. 7. Identify sources of information for a statement of cash flows. 8. Discuss special problems in preparing a statement of cash flows. 9. Explain the use of a worksheet in preparing a statement of cash flows. Chapter 23 - Chapter 23 - STATEMENT OF CASH FLOWS STATEMENT OF CASH FLOWS Chapter 23 - Chapter 23 - STATEMENT OF CASH FLOWS STATEMENT OF CASH FLOWS Preparation of the Statement Special Problems in Statement Preparation Use of a Worksheet Usefulness Classification of cash flows Format of statement Steps in preparation Examples Sources of information Indirect vs. direct method Adjustments to net income Accounts receivable (net) Other working capital changes Net losses Significant noncash transactions Preparation of worksheet Analysis of transactions Preparation of final statement Statement of Cash Flows Statement of Cash Flows Statement of Cash Flows Statement of Cash Flows Primary purpose: To provide information about a companys cash receipts and cash payments during a period. Secondary objective: To provide cash-basis information about the companys operating, investing, and financing activities. Section 1 - Preparation of the Section 1 - Preparation of the Statement of Cash Flows Statement of Cash Flows Section 1 - Preparation of the Section 1 - Preparation of the Statement of Cash Flows Statement of Cash Flows Provides information to help assess: 1. Entitys ability to generate future cash flows. 2. Entitys ability to pay dividends and meet obligations. 3. Reasons for difference between net income and net cash flow from operating activities. 4. Cash and noncash investing and financing transactions. Usefulness of the Statement of Cash Flows Usefulness of the Statement of Cash Flows Usefulness of the Statement of Cash Flows Usefulness of the Statement of Cash Flows Income Statement Transactions Operating Activities Changes in Investments and Long-Term Asset Items Investing Activities Changes in Long-Term Liabilities and Stockholders Equity Financing Activities Classification of Cash Flows Classification of Cash Flows Classification of Cash Flows Classification of Cash Flows Illustration 23-1 Classification of Typical Cash Inflows and Outflows Classification of Cash Flows Classification of Cash Flows Classification of Cash Flows Classification of Cash Flows Illustration 23-1 Classification of Typical Cash Inflows and Outflows Classification of Cash Flows Classification of Cash Flows Classification of Cash Flows Classification of Cash Flows The basis recommended by the FASB for the statement of cash flows is actually cash and cash equivalents. cash flows is actually cash and cash equivalents....
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Chapter 23 - 1. Describe the purpose of the statement of...

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