Statement of Cash Flows: Comprehensive Example

How do you prepare a complete statement of cash flows using the indirect method? Professor Farhat works through a comprehensive statement of cash flows example, building the operating, investing, and financing sections step by step. This financial accounting tutorial shows how to adjust net income for non-cash items and working capital changes, use T-accounts to find missing investing and financing amounts, and present the required disclosures. Ideal for CPA candidates studying FAR and college students in an intermediate accounting course. Try it free at farhatlectures.com — interactive exercises, lectures, simulations, cases, multiple choice, and AI tools for CPA, CMA, EA and students. Video Timeline & Key Concepts: 0:00 — Introduction 0:12 — Operating section using the indirect method 4:39 — Investing section using T-accounts 21:31 — Financing section: equity, debt, and dividends 23:22 — Required disclosures for the statement of cash flows Frequently Asked Questions: What are the three sections of the statement of cash flows? The statement of cash flows is divided into operating activities, investing activities, and financing activities, and together they reconcile the change in cash for the period. How does the indirect method present operating cash flow? The indirect method starts with net income and adjusts it for non-cash items such as depreciation, removes gains and adds back losses, and reflects changes in current assets and liabilities to arrive at cash from operations. How do T-accounts help prepare the statement? T-accounts reconstruct the activity in long-term asset and liability accounts, which helps identify missing amounts such as equipment purchases, asset disposals, and debt repayments for the investing and financing sections. Where are dividends reported on the statement of cash flows? Dividends paid to shareholders are reported in the financing activities section, not the operating section, under U.S. GAAP. What disclosures are required for the statement of cash flows? Companies must disclose significant non-cash investing and financing activities, such as issuing stock to settle debt, and report the amount of cash paid for interest and for income taxes. #CPAexam #CMAexam #enrolledagentexam #accountingcourses #collegecourses #courses #FAR #statementofcashflows #indirectmethod #cashflow #intermediateaccounting #ProfessorFarhat