Claudette Elliott, Lavern George, Tristan Hampton, Meagan Jones, dawn Prichard ACC/421
December 5, 2012
Statement of Cash Flow
The importance of cash the cash flow statement help businesses and creditors understand how liquid a company is. Team A discussed some important factors about the statement of cash flow. The purpose of the statement of cash flow and how it is used in accounting is explained. The direct and indirect method of preparing a statement is used. Steps in preparation and classification are explained. The team also examines things that they struggled with and also things that they were comfortable with. The purpose of the statement of cash flow
Statement of cash flows purpose is to provide information of cash payment, cash receipt of a business during a period. It also provides answer to question for future investors wanting to make investment in the company. The investors will looks at the business cash flow statement “where did the cash come from during the period, what was the cash used for during the period, what was the change in the cash balance during the period” (Kieso, Weygandt, Warfield, 2010, p. 198). This shows the business economic and solvency which is more attracted to the investors. The statement of cash flow reports has four major categories, and they are 1) Cash effect of operating during a period. 2) Investing transactions transaction. 3) Financing transaction and 4) the net cash increase or decrease during the period. Between the four every aspect of a business transaction is covered. Statement of cash flow documents shows incoming and outgoing cash of the business. The document makes available a direction in which help guide decision of potential investor, reader, or lender understand the company financial report. Because this document is prepared last it will show a company income statement, balance sheet, owner equity statement, as the result, the report adds validity and...