
Concept Introduction:
Cash Flow Statements:
Cash flow statements are an integral part of the financial statements of a company. They reflect the direction and movement of the
Cash flows from Investing activities − The cash inflows refer to sales and income from investing activities and cash outflows include cash outflows from the investing activities in the form of purchase of fixed assets and investments.
Cash flows from Financing activities − The cash inflows refer to income from financing activities such as raising share capital and debt and cash outflows include cash outflows from the financing activities in the form of dividends and interest paid.
There are two methods of preparing cash flow statements:
Direct Method − It measures the actual cash inflows and cash outflows that are affected during a particular reporting period. The actual cash flows do not include non-cash items and items that are recorded owing to the accrual principle.
Indirect Method −It measures the cash inflows and cash outflows that are affected during a particular reporting period including the non-cash items and items that are recorded owing to the accrual principle.
- Method of preparation of cash flow statements
- Reason for subtraction of increase in
accounts receivable while computing Cash flows from Operating Activities

Want to see the full answer?
Check out a sample textbook solution
Chapter 16 Solutions
Fundamental Accounting Principles
- What must have been the total salesarrow_forwardAt the end of the current year, the owners' equity in Marino Corp. is $425,000. During the year, the assets of the business increased by $95,000, and the liabilities increased by $130,000. What must owners' equity at the beginning of the year have been?arrow_forwardGeneral accounting questionarrow_forward
- Need help with this question solution general accountingarrow_forwardPlease provide answer this general accounting questionarrow_forwardBlue Wave Enterprises had revenues of $420,000, expenses of $275,000, and dividends of $60,000. When Income Summary is closed to Retained Earnings, What is the amount of the debit or credit to Retained Earnings? A. credit of $145,000 B. debit of $145,000 C. credit of $85,000 D. debit of $85,000arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





