Statement of Cash Flows Paper
”What is the purpose of the statement of cash flows? What information does it provide”(Kieso, Weygandt, & Warfield, p. 1253)?
Companies provide four statements to abide by the Generally Accepted Accounting Principles (GAAP). These financial statements are the income statement, equity statement, the balance statement, and the statement of cash flows. Each statement provides different types of information necessary to make a knowledgeable decision about a investing in company. The statement of cash flows is useful because it ” provides information on a cash basis about an organization operating, investing, and financing activities” (Kieso, Weygandt, & Warfield, p. 1213). Each of these methods is important to users and provides different information. It also provides information on the inflow and outflow of cash during an accounting period. The statement of cash flows presents this information in either the indirect method or the direct method.
The statement of cash flows uses is to provide information about its ability to generate cash in the future. This information may come from three sources the income statement, the balance sheet, and select cash transaction data. The income statement provides the operating activities cash flow. The balance sheet provides the changes in assets, liabilities, and equities. It also shows how the company pays dividends and meets it financial obligations to creditors and investors. Select cash transactions have general ledger entries that explain why the company makes each transaction. Companies use a statement of cash flows to adjust the net income on an accrual basis. This determines why the net cash flow is different from the operating activities net cash number. The statement of cash flows also tells why the cash investing and financing transactions were done.
The operating activities in the...