The financial statement describes the report that how a company uses properly the funds that are given by the shareholders, lenders and it also shows the status of the funds. One of the main parts of the financial statement is the statement of cash flow which shows the ins and out of cash made by the company. In economic or financial accounting, statement of cash flow is also popular as cash flow statement. The statement shows how a change in balance sheet account and income effects cash and cash equivalents.
The statement of cash flow is considered with the flow of cash in a business with the details of in and out. Whatever changes are made in the balance sheet, the statement includes the result. If you have the need of getting answers related cash flow statements you may be helped with the articles from Statement of Cash Flows homework solutions. The answers will make perfectly understood and help you a lot while preparing papers of exams. You may get some ideas following this article. You can break down the yearly financial information by preparing an authentic cash flow statement. In the business world, the statement is very important to be aware of the investments and financial activities. You will be able to understand the growth of your company if you are able to make and read the statement of your company.
Goal of Statement of Cash Flows
You may also call it as the flow of funds statement as it reflects a companyâ€™s liquidity. The statement is important as there is an importance of getting the information of a companyâ€™s liquidity and many other changes in the balance sheet in future. With the change of we get to notice that there are many changes in assets, mortgages and other liabilities of a firm. For evaluating these things we have to take help from the statement of cash flows. Many companies have different methods of accounting and the effects have many influences while comparing the companies. So, if we use the statement we can avoid the complications of different methods. The statement of cash flows describes the time and probability of cash flows in future. Statement of Cash Flows homework solutions is telling you that the cash flow statement or the flow of funds statement is a genuine financial statement.
Evolution of Cash Flows
We have seen many changes in the financial market and the Economics. From time to time many variations have come to simplify the accounting for commercial purposes. To develop the models of business and the marketing of production accounting is an important strategy. So, Statement of Cash Flows homework solutions is giving you some example of the changes in the statement of cash flow. In 1863, Dowla is Iron Company noticed that they have no money to invest in the further project. To find the fund the manager introduced a new statement which was called as the â€˜comparison balance sheetâ€™. In that time cash flow statement was used for the first time. Later we have many examples and modified calculations. In the US in 1973, some rules and regulations were made by the Financial Accounting Standards Board. The US GAAP announced that every company has to report the sources and uses of funds. Though there are many similarities between the rules of US GAAP and IAS, there are some differences also for the cash flow statement.
Relation to the income and balance sheet
On behalf of the Statement of Cash Flows homework solutions, I will discuss the relation of the CFS with the balance sheet and income statement. First of all, you should remember that the idea of CFS has been derived from the balance sheet and income statement. In the income statement, we get a net earning from which the information of CFS is deduced. On the other hand, CFS is calculated from the balance sheet and in this case, the balance sheet of two consecutive years is needed. The CFS analyzes the financial information from the balance sheet and income.
Operative system of the statement
The cash flow statement has an operative activity by which it determines the flows of cash in a firm or a company. It includes the production, marketing, sales and other profits and deficits. The companies have to deliver their products get payments in the form of cash or cheques. For the manufacturing companies have to spend money in buying raw materials, setting up stores, marketing, and other expenditures. According to the IAS rules and provisions, the CFS includes all the bills of loans, interests of loans, payments of goods and services, payments to the labors and employees debts, bonds, and others. The CFS also includes the financial activities of a company. We know that companies have to invest money for the production and they get loans, shares and thus there comes a flow cash. These things are also in the list. You may get more information from Statement of Cash Flows homework solutions.
What is the procedure?
There are two methods of creating the statement of cash flow and these are direct method and indirect method. Whenever you want to make a statement of cash flow you have to collect the information like comparative balance sheets, income statements of the company.Statement of Cash Flows homework solutions is describing the methods to you.
- Direct method
This includes the calculations of cash bills and payments. If any kind of payments, funds, taxes, and receipts are directly linked to the investments then they are enlisted under the investing and financing activities. But there are some variations in different rules.
- Indirect method
It uses the net profit of a company and makes adjustments of all kind of transactions. The method starts with the time followed by non-cash expenditures, profits, and losses. It includes all non-cash assets, liabilities, and dividends payable. This method is used by almost all the companies as it shows a detail report from income to cash.
I think this article will help you suggestively to understand the cash flow statement and you will be able to write answers on the questions.