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Statement of Cash Flows


accrual basis accounting

recognizing revenue when earned and recording expenses when incurred regardless of the cash received or paid

cash basis accounting

recognizing and recording revenue or expenses in the period when cash is received or paid

cash equivalent

highly liquid short-term investment having the ability to be readily converted into cash

cash flows from financing activities

liability and owners' equity items that relate to obtaining and repaying borrowed amounts from creditors, as well as obtaining capital from shareholders

cash flows from investing activities

transactions and events that relate to acquiring and disposing of investments and productive long-lived assets

cash flows from operating activities

all transactions and events that are not investing and financing activities

direct method

basic accounting of cash receipts (or inflows) and cash disbursements (or outflows) from operating, investing, and financing activities

Financial Accounting Standards Board (FASB)

independent nonprofit standard-setting body responsible for establishing accounting standards for public companies in the United States

free cash flow

discretionary cash flow amount available for purchasing additional investments, retiring debt, purchasing treasury stock, or increasing company liquidity

generally accepted accounting principles (GAAP)

combination of accounting principles, standards, and procedures that govern the preparation of financial statements

indirect method

method that reconstructs net cash flows from operating activities adjusting for noncash items in the income statement

International Accounting Standards Board (IASB)

independent foundation that develops a single set of globally accepted accounting standards (the IFRS) using due process

International Financial Reporting Standards (IFRS)

high-quality, understandable, enforceable, and globally accepted standards, based on clearly articulated principles

Securities and Exchange Commission (SEC)

independent agency of the U.S. government that enforces federal securities laws, proposes securities rules, and regulates the securities industry

statement of cash flows

one of the four major financial statements, representing an organization's cash receipts and payments by operating, investing, and financing activity