“Accounting for Cash Flow throughout the Business
Utilizing Accrual Accounting Practices”

Group 4
Kesha Smith
Dave Rebar
Amber Sabrina
Tanisorn Ruengpinyophun
February 17, 2012

Table of Content

I. The Statement of Cash Flow II.

The Statement of Cash Flow

The statement of cash flow (SCF) is one major part of basic financial statements. The purpose of the SCF is to provide information about the cash receipts and cash disbursements of an enterprise that occurred during a period (Spiceland, Sepe & Tomassini, 2004, p. 198). The SCF reflects the liquidity and solvency position of a company. It provides inside information on the company’s ability to generate cash from its main operations, and it’s an indicator to help give information on future expansion. It also helps gauge the company’s ability to handle cash effectively. An analysis of the SCF will provide the company information on the funds available to help repay debts and repayment of assets (Lamas & Gregorio, 2009, p. 99). There are three primary elements of the SCF, (1) operating activities, (2) investing activities, and (3) financing activities; there are two other requirements: (4) the reconciliation of the net increase or decrease in cash with change in the balance of the cash account and (5) noncash investing and financing activities (Spiceland, Sepe, & Tomassini, 2004, p1188). Let’s get a better insight of the flow of each activity. Operational activities are the inflow and out flow of the cash activities which includes the net income that is reported in the income statement. They are reported in one of two categories, direct or indirect method. The direct method which is recommended by the FASB encourages enterprises to report cash flow from operating activities directly by showing major classes of operating cash receipts and payments (Financial