Follow the Money! Studying Cash Flow
In This Chapter
Recognizing the difference between cash receipts and net income
Looking at the different sections of the statement of cash flows
Presenting cash flow using the direct or indirect method
Considering recent changes affecting presentation
Putting the statement of cash flows to work for you
Intermediate accounting covers financial accounting topics, which are all about the accrual method. Under the accrual method, you record revenue when it is earned and realizable, and record expenses as they are incurred, regardless of whether they were actually paid. The missing piece when using the accrual method of accounting is the effect on business operations when cash changes hands.
For the users of the financial statements to get more of a total picture on the health of the business, cash payments and receipts have to be reconciled with accrual transactions. You accomplish this by preparing a statement of cash flows.
When you took ...