Unit 10: Statement of Cash Flows
Remember that the balance sheet and income statement are prepared using the accrual basis of accounting. The statement of cash flows is prepared using information from the accrual basis statements to tell what cash was received for and how cash was spent. The statement of cash flows classifies business transactions in to operating activities, investing activities, and financing activities.
Completing this unit should take you approximately 7 hours.
Upon completion of this unit, the student will be able to:
- describe the types of business transactions that are included in operating, investing, and financing activities; and
- describe the difference between the indirect and direct methods of preparing the statement of cash flows.
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.