Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 12 - Statement of Cash Flows - Questions: 7

Answer

Step1: Statement of Cash flows is prepared taking information from the below mentioned three sources. a) Comparative balance Sheet b) Income Statement (current) c) Additional Information Step2: These statements are required for the below mentioned steps: 1. Determining net cash provided/used by operating activities by converting net income from an accrual basis to a cash basis. 2. Analysing changes in non-current assets and liability account and records as investing and financing activities, or disclose as non-cash activities. 3. Compare the net change in cash on the statement of cash flows with the change in the cash account reported on the opening balance sheet and the closing balance sheet to make sure the amount match from cash flow statement and balance sheet.

Work Step by Step

a)Information in comparative balance sheet indicates the amount of changes in assets, all liabilities and shareholders' equity. b) Information in the income statement helps in determining the amount of cash generated or used by operational activities during the mentioned period. c) Transaction data that are needed to see how cash was provided or used during the mentioned period. Step2: It is necessary to use the above mentioned three statements in preparing statement of cash flows.
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