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The preparation of the Cash Flow statement is chal...




The preparation of the Cash Flow statement is challenging and time consuming and unlike the other major financial statements, this one is not prepared from the adjusted trial balance. Net cash flow from operating activities under the direct method is the difference between cash revenues and cash expenses. The direct method adjusts the revenues and expenses directly to reflect the cash basis. This results in cash net income, which is equal to ?net cash flow from operating activities.? The indirect method involves adjusting accrual net income. This is done by starting with accrual net income and adding or subtracting noncash items included in net income. Examples of adjust-ments include depreciation and other noncash expenses and changes in the balances of current asset and current liability accounts from one period to the next. From what sources does the information to prepare this statement come, and what infromation does each source provide?


Paper#3155 | Written in 18-Jul-2015

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