Exam 16: Reporting and Analyzing Cash Flows

Accounting standards require companies to include a statement of cash flows in a complete set of financial statements.

Reconstruction analysis is used to identify the types of purchases and disposals of property, plant and equipment by reproducing the entries that occurred in the year.

Internal users of the statement of cash flows use cash flow information to plan day-to-day operating activities and make non-current investments.

Cash flows from selling non-current investments are reported in the statement of cash flows as:

A statement of cash flows should reconcile the differences between the beginning and ending balances of:

Noncash financing activities are disclosed in a note in the financing section of the statement of cash flows.

If taxes payable increased this year over last year's ending balance, cash payments to the government this year would be:

If accounts receivable have a positive effect on cash flow that is because accounts receivable increased during the year.

The purpose of the statement of cash flows is to report the major items comprising cash receipts and cash payments during a period.