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Statement of cash flows: It is one of the financial statement that shows the cash and cash equivalents of a company for a particular period. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financing activities of a company.
Indirect method: Under this method, the following amounts are to be adjusted from the Net Income to calculate the net cash provided from operating activities.
The below table shows the way of calculation of cash flows from operating activities:
Cash flows from operating activities (Indirect method) |
Add: Decrease in current assets |
Increase in current liability |
|
Loss on sale of plant assets |
Deduct: Increase in current assets |
Decrease in current liabilities |
Gain on sale of plant assets |
To Describe: The five steps used to prepare the statement of cash flows by the indirect method.
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Chapter 14 Solutions
Horngren's Financial & Managerial Accounting Plus MyLab Accounting with Pearson eText -- Access Card Package (6th Edition)
- A worksheet for the statement of cash flows consists of two sections: A. cash effects and non-cash effects B. cash effects and net income C. balance sheet effects and non-cash effects D. balance sheet effects and cash effectsarrow_forwardEXPLAIN FOUR ITEMS COVERED UNDER FINANCING ACTIVITIES IN THE STATEMENT OF CASH FLOWS?arrow_forwardBriefly state the purposes of a statement of cash flows.arrow_forward
- List the components of the statement of cash flows.arrow_forwardIdentify and briefly explain the three categories of activities in thestatement of cash flows.arrow_forwardWhat are the three major types of activities classified on a statement of cash flows? Give an example of a cash inflow and a cash outflow in each classification.arrow_forward
- Describe the three basic types of cash flow activities.arrow_forwardWhat are the three major sections on a statement of cash flows, and what are the general rulesthat determine the transactions that should be included in each section?arrow_forwardUsing examples from the income statement distinguish between cash outflows and cash inflows. Please provide two examples for each cash flow.arrow_forward
- Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
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