Site MapHelpFeedbackThe Statement of Cash Flows Revisited
The Statement of Cash Flows Revisited


The objective of financial reporting is to provide investors and creditors with useful information, primarily in the form of financial statements. The balance sheet and the income statement—the focus of your study in earlier chapters—do not provide all the information needed by these decision makers. Here you will learn how the statement of cash flows fills the information gap left by the other financial statements.

The statement lists all cash inflows and cash outflows, and classifies them as cash flows from (a) operating, (b) investing, or (c) financing activities. Investing and financing activities that do not directly affect cash also are reported.



Explain the usefulness of the statement of cash flows.

Define cash equivalents.

Determine cash flows from operating activities by the direct method.

Determine cash flows from operating activities by the indirect method.

Identify transactions that are classified as investing activities.

Identify transactions that are classified as financing activities.

Identify transactions that represent noncash investing and financing activities.

Prepare a statement of cash flows with the aid of a spreadsheet or T-accounts.





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