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.
Read sections 16.1 to 16.22 of Chapter 16 on pages 394 to 463. This section explains and shows how to record cash flow from operating activities on the statement of cash flows.
This reading shows the two different methods of preparing a statement of cash flows: direct and indirect.
10.2: Financing Activities
This exercise quizzes you on your knowledge of the statement of cash flow and its components.
Unit 10 Assessment
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.