Question

What information is provided by the Statement of Cash Flow? Describe the steps to create the statement - choose either the direct or indirect method in your response. Please provide one main post and two additional peer interactions. Your main post must be a minimum of 200 words (no quotes) that indicates an understanding of the concepts

Answer 1

Answer:-A cash flow statement is the financial statement that measures the cash generated or used by a company in a given period. In financial accounting, a cash flow statement, also known as statement of cash flows, is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing and financing activities

Explanation:- Cash flows are classified as operating, investing, or financing activities on the statement of cash flows, depending on the nature of the transaction. Each of these three classifications is defined as follows.

1)-Operating activities include cash activities related to net income. For example, cash generated from the sale of goods (revenue) and cash paid for merchandise (expense) are operating activities because revenues and expenses are included in net income.

2)-Investing activities include cash activities related to non current assets. Non current assets include (a) long-term investments; (b) property, plant, and equipment; and (c) the principal amount of loans made to other entities. For example, cash generated from the sale of land and cash paid for an investment in another company are included in this category. (Note that interest received from loans is included in operating activities.)

3)-Financing activities include cash activities related to non current liabilities and owners’ equity. Non current liabilities and owners’ equity items include (a) the principal amount of long-term debt, (b) stock sales and repurchases, and (c) dividend payments. (Note that interest paid on long-term debt is included in operating activities.)