Identify a company's inflows and outflows of cash during a period by analyzing income statement data, changes in noncash balance sheet accounts, and any additional information provided. Distinguish among a company's operating, investing, and financing activities and be able to classify cash flows into these three categories. Calculate cash flows from operating activities under both the direct and indirect approaches. Identify noncash financing and investing activities and prepare a supplementary schedule to disclose these activities. A statement of cash flows is required for any period for which a balance sheet and income statement are presented.
Classification depends on the general nature of a company's operations.
Basic steps in preparing the statement of cash flows - T account approach 1. Determine the net change in cash or cash equivalents during the period - this is the balancing figure on the statement of cash flows 2. Analyze all non-cash balance sheet accounts. Items in 2a should be classified as operating, investing, or financing activities. Items in 2b should be disclosed at the bottom of the statement or in a footnote.