STEPS TO DETERMINE INFORMATION
STATEMENT OF CASH FLOWS
1. Find change in Cash—This is the target number.
2. Find cash flow from operations
(Using direct or indirect method)
3. Find Cash Flow from A. Financing and
In real life: Using data from comparative balance sheets, trace
changes through ledgers and journals probably using a worksheet
to organize, analyze, and prove data disclosed.
In the classroom: Determine the changes in noncurrent accounts
and notes from comparative balance sheets. Use the relevant data
the text provides that comes from the ledgers and the journals to
systematically analyze the data using chart and/or reconstructing
4. Combine cash flows from all three activities (from 2 and 3) to find
net cash flow and prove change in cash. (Target number
determined in Step 1).
Note: Once the above information has been gathered, the statement
can be prepared following the required format. If the direct method
was used, GAAP requires a reconciliation of net income to cash
provided from operations.