17: In a Set of Financial Statements, What Information Is Conveyed by the Statement of Cash Flows?
- Page ID
- 24750
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\(\newcommand{\avec}{\mathbf a}\) \(\newcommand{\bvec}{\mathbf b}\) \(\newcommand{\cvec}{\mathbf c}\) \(\newcommand{\dvec}{\mathbf d}\) \(\newcommand{\dtil}{\widetilde{\mathbf d}}\) \(\newcommand{\evec}{\mathbf e}\) \(\newcommand{\fvec}{\mathbf f}\) \(\newcommand{\nvec}{\mathbf n}\) \(\newcommand{\pvec}{\mathbf p}\) \(\newcommand{\qvec}{\mathbf q}\) \(\newcommand{\svec}{\mathbf s}\) \(\newcommand{\tvec}{\mathbf t}\) \(\newcommand{\uvec}{\mathbf u}\) \(\newcommand{\vvec}{\mathbf v}\) \(\newcommand{\wvec}{\mathbf w}\) \(\newcommand{\xvec}{\mathbf x}\) \(\newcommand{\yvec}{\mathbf y}\) \(\newcommand{\zvec}{\mathbf z}\) \(\newcommand{\rvec}{\mathbf r}\) \(\newcommand{\mvec}{\mathbf m}\) \(\newcommand{\zerovec}{\mathbf 0}\) \(\newcommand{\onevec}{\mathbf 1}\) \(\newcommand{\real}{\mathbb R}\) \(\newcommand{\twovec}[2]{\left[\begin{array}{r}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\ctwovec}[2]{\left[\begin{array}{c}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\threevec}[3]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\cthreevec}[3]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\fourvec}[4]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\cfourvec}[4]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\fivevec}[5]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\cfivevec}[5]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\mattwo}[4]{\left[\begin{array}{rr}#1 \amp #2 \\ #3 \amp #4 \\ \end{array}\right]}\) \(\newcommand{\laspan}[1]{\text{Span}\{#1\}}\) \(\newcommand{\bcal}{\cal B}\) \(\newcommand{\ccal}{\cal C}\) \(\newcommand{\scal}{\cal S}\) \(\newcommand{\wcal}{\cal W}\) \(\newcommand{\ecal}{\cal E}\) \(\newcommand{\coords}[2]{\left\{#1\right\}_{#2}}\) \(\newcommand{\gray}[1]{\color{gray}{#1}}\) \(\newcommand{\lgray}[1]{\color{lightgray}{#1}}\) \(\newcommand{\rank}{\operatorname{rank}}\) \(\newcommand{\row}{\text{Row}}\) \(\newcommand{\col}{\text{Col}}\) \(\renewcommand{\row}{\text{Row}}\) \(\newcommand{\nul}{\text{Nul}}\) \(\newcommand{\var}{\text{Var}}\) \(\newcommand{\corr}{\text{corr}}\) \(\newcommand{\len}[1]{\left|#1\right|}\) \(\newcommand{\bbar}{\overline{\bvec}}\) \(\newcommand{\bhat}{\widehat{\bvec}}\) \(\newcommand{\bperp}{\bvec^\perp}\) \(\newcommand{\xhat}{\widehat{\xvec}}\) \(\newcommand{\vhat}{\widehat{\vvec}}\) \(\newcommand{\uhat}{\widehat{\uvec}}\) \(\newcommand{\what}{\widehat{\wvec}}\) \(\newcommand{\Sighat}{\widehat{\Sigma}}\) \(\newcommand{\lt}{<}\) \(\newcommand{\gt}{>}\) \(\newcommand{\amp}{&}\) \(\definecolor{fillinmathshade}{gray}{0.9}\)- 17.1: The Structure of a Statement of Cash Flows
- This page outlines learning objectives for understanding cash flows in financial accounting, emphasizing their importance under U.S. GAAP. It categorizes cash flows into operating, investing, and financing activities, highlighting the distinct nature of financing activities that involve liabilities and equity.
- 17.2: Cash Flows from Operating Activities- The Direct Method
- This page discusses cash flow reporting methods, focusing on the direct and indirect approaches. While FASB prefers the direct method, most companies use the indirect method. It outlines key steps for calculating cash flows, including adjustments for non-cash items and changes in accounts, illustrated with examples from Liberto Company. Despite reporting a net income of $100,000, Liberto generated $133,000 in cash from operations, highlighting the importance of accurate cash flow conversion.
- 17.3: Cash Flows from Operating Activities- The Indirect Method
- This page discusses the differences in the operating activities section of cash flow statements, focusing on the indirect and direct methods, and the treatment of noncash items and gains. It highlights ongoing debates in U.S. GAAP regarding the classification of dividends and interest in operating activities. An interview with Robert A. Vallejo emphasizes distinctions between IFRS and U.S. GAAP, particularly regarding the flexibility of classifying interest and dividends under IFRS.
- 17.4: Cash Flows from Investing and Financing Activities
- This page emphasizes the significance of analyzing cash flows from investing and financing activities to assess a company's financial health. It presents examples from The Walt Disney Company and Johnson & Johnson, highlighting substantial cash outflows from investments and financing. Additionally, it outlines key financing transactions, stressing the importance of analyzing nonoperational asset and liability changes for cash flow statements. Kevin G.
- 17.5: Appendix
- Ashe Corporation is preparing its inaugural financial statements, including a cash flow statement using the indirect method, which begins with net income and adjusts for noncash expenses and working capital changes. Key activities include selling land and a building, purchasing equipment, borrowing, and issuing stock.
- 17.6: End-of-Chapter Exercises
- This page covers the statement of cash flows in accounting, outlining its significance, classifications, calculation methods, and impacts of account changes. It includes practical exercises related to cash flow reporting. Additionally, it details Webworks' financial activities for April 30, involving client billing, supplies purchase, inventory sales, and various payments.