• Unit 10: Statement of Cash Flows

    The balance sheet and income statement are prepared using the accrual basis of accounting. The statement of cash flows is prepared using information from accrual-basis statements to tell what cash was received and how cash was spent. The statement of cash flows classifies business transactions as operating activities, investing activities, or financing activities. Cash management is crucial to business survival. Just as you might make enough on an annual basis to pay all your bills, you need to know if you will have enough in your checking account when your school tax bill is due. The timing of cash flows is critical for all businesses to survive.

    Completing this unit should take you approximately 6 hours.

    • Upon successful completion of this unit, you will be able to:

      • distinguish the types of business transactions that are included in operating, investing, and financing activities;
      • summarize the difference between the indirect and direct methods of preparing the statement of cash flows; and
      • prepare a cash flow statement.

    • 10.1: Operating Activities

      Operating activities on the statement of cash flows stem from a company's day-to-day operations. These activities include making sales to customers and paying vendors and employees. The operating activities section of the statement of cash flows can be prepared using the direct or indirect method.

      • Analysis Using the Statement of Cash Flows Book

        Read this chapter, which shows how to record cash flow from operating activities on the statement of cash flows. The chapter also provides an overview of cash flows from operating activities and steps in preparing a statement of cash flows, which will be covered in more detail in the resources that follow.

      • Calculating Cash Flows Book

        This article shows the two different methods of preparing a statement of cash flows: direct and indirect.

      • Cash Flow Statement Page
      • Indirect Method Page

        This video provides an overview of the preparation of the cash flow statement using the indirect method.

      • Operating Activities Page

        Watch this video to learn how to complete the operating activities section of the cash flow statement using the indirect method.

    • 10.2: Financing Activities

      • Financing Activities Page

        Watch this video to learn how to complete the financing activities section of the cash flow statement using the indirect method.

    • 10.3: Investing Activities

      • Investing Activities Page

        Watch this video to learn how to complete the investing activities section of the cash flow statement using the indirect method.

      • Cash Flow Exercise Book

        This exercise quizzes you on your knowledge of the statement of cash flow and its components.

    • Unit 10 Assessment

      • Practice Problems: Statement of Cash Flows Book
        Complete the practice problems. Check your answers after you finish.
      • Unit 10 Assessment Quiz
        Receive a grade

        Take this assessment to see how well you understood this unit.

        • This assessment does not count towards your grade. It is just for practice!
        • You will see the correct answers when you submit your answers. Use this to help you study for the final exam!
        • You can take this assessment as many times as you want, whenever you want.