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Unlike
other major financial statements, statement of cash
flows is not prepared from the
adjusted
trial balance. The information to prepare this
statement usually comes from three sources. These
are:
-
Comparative balance sheets that provide
the amount of the changes in assets liabilities,
and equities from the beginning to the end of
the period.
-
Current income statement data that help readers
determine the amount of cash provided by or used by
operations during the period.
-
Selected transaction data from the general
ledger that provide additional detailed information
needed to determine hw cash was provided or used
during the period.
Preparing
statement of cash flows from the data source above involves
three major steps:
Determine the change in cash:
This procedure is
straightforward because the difference between the
beginning and the ending cash balance can be easily
computed from an examination of the comparative
balance sheets.
Determine the net cash flow from operating activities:
This procedure is complex. It involves analyzing not
only the current year's income statement but also
comparative balance sheets and selected transaction
data.
Determine
net cash flows from investing and financing activities:
All other changes in the balance sheet accounts must be
analyzed to determine their effects on cash. |
