Chapter 21, Problem 21.18Q

To determine

Statement of cash flows: This statement reports all the cash transactions which are responsible for inflow and outflow of cash and result of these transactions is reported as ending balance of cash at the end of reported period.

Financial Accounting Standards Board (FASB): FASB is an independent 7-member board, of accounting professionals overseeing the creation of financial statement. FASB standards are generally known as GAAP.

To Explain: The reason for FASB to recommend following direct method, over the indirect method, while preparing the statement of cash flows.