Answer
Step1:
Many activities in a company are non-cash activities which do not involve cash.
Step2:
Non cash activities are therefore disclosed in a separate schedule.
Step3:
Non Cash activities are not reported in the body of the statement of cash flows.
Work Step by Step
Step1:
Examples of such activities are:
1. Issuing Common stock to purchase assets of a company.
2. Converting bonds of the company into common stock,
3. Issuing debt of the company to purchase assets.
Step2:
To satisfy the full disclosure principle.
Step3:
Instead, companies mention all the non-cash activities in either a separate schedule which is
maintained at the bottom of the statement of cash flows or maintained in a separate schedule or sometimes a supplementary schedule is maintained to the financial statements.
