Teaching the Indirect Method of the Statement of Cash Flows in Introductory Financial Accounting: A Comprehensive, Problem-Based Approach

2004 ◽  
Vol 80 (1) ◽  
pp. 41-46
Author(s):  
Daniel R. Brickner ◽  
Gary B. Mccombs
Keyword(s):  
Indirect Method ◽  
Cash Flows ◽  
Financial Accounting ◽  
Statement Of Cash Flows

scholarly journals Finding an Easier Way to Explain the Statement of Cash Flows

2021 ◽  
Vol 11 (3) ◽  
pp. 25
Author(s):  
Seung Hwan Kim
Keyword(s):  
Indirect Method ◽  
Financial Statements ◽  
Cash Flows ◽  
Financial Accounting ◽  
The Other ◽  
Net Income ◽  
Public Companies ◽  
Difficult Time ◽  
Statement Of Cash Flows ◽  
Operating Activities

The statement of cash flows is one of the required financial statements of public companies, and thus is required of all accounting majors. After learning the other required financial statements in an introductory financial accounting course and, again, in the first intermediate accounting course, accounting majors learn how to prepare the statement of cash flows in the second or last intermediate accounting course. Most accounting majors find the statement of cash flows significantly more difficult to learn than any other financial statements. Especially, students find it most difficult to understand the indirect method of preparing the statement of cash flows. Preparing the statement of cash flows using the indirect method, students go through the most difficult time, specifically, doing the adjustments that are made to net income to reconcile to cash flows from operating activities.In this paper, presented is a different way to explain the principles of indirect method of preparing the statement of cash flows with a focus on the reconciliation of net income to cash flows from operating activities. Different from the explanations in the textbooks available in the market, the approach presented in the paper is preferred by all the students who were taught the statement of cash flows. Also, pointed out in the paper are a few things that students are easily confused of in learning the statement of cash flows.

scholarly journals A Research Note On The Issue Of Non-Articulation And The Method Used To Calculate Net Operating Cash Flow

2011 ◽  
Vol 25 (1) ◽  
Author(s):  
Terry J. Ward ◽  
Jon Woodroof ◽  
Benjamin P. Foster
Keyword(s):  
Cash Flow ◽  
Indirect Method ◽  
Direct Method ◽  
Accounting Standards ◽  
Cash Flows ◽  
Financial Accounting ◽  
Financial Accounting Standards Board ◽  
Font Size ◽  
Operating Cash Flow ◽  
Statement Of Cash Flows

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">Using a proxy for nonarticulation, prior researchers found evidence that many companies using the indirect method of reporting net cash flow from operations have a significant level of nonarticulation.<span style="mso-spacerun: yes;">&nbsp; </span>The purpose of this study is to determine if companies using the direct method of reporting net cash flow from operations experience significantly lower levels of nonarticulation than companies that use the indirect method of reporting net cash flow from operations.<span style="mso-spacerun: yes;">&nbsp; </span>Results show that companies using the direct method have significantly less nonarticulation than companies using the indirect method.<span style="mso-spacerun: yes;">&nbsp; </span>This finding suggests that the Financial Accounting Standards Board (FASB) should consider requiring companies to use the direct method of preparing the Statement of Cash Flows.</span></span></p>

scholarly journals A Conceptual Framework For The Indirect Method Of Reporting Net Cash Flow From Operating Activities

2010 ◽  
Vol 3 (12) ◽  
pp. 19-32
Author(s):  
Ting J. (TJ) Wang
Keyword(s):  
Conceptual Framework ◽  
Cash Flow ◽  
Indirect Method ◽  
Accounting Standards ◽  
Cash Flows ◽  
Financial Accounting ◽  
International Accounting Standards ◽  
Approach To Teaching ◽  
Statement Of Cash Flows ◽  
Cash Basis

This paper describes the fundamental concept of the reconciliation behind the indirect method of the statement of cash flows. A conceptual framework is presented to demonstrate how accrual- and cash-basis accounting methods relate to each other and to illustrate the concept of reconciling these two accounting methods. The conceptual framework recognizes additional categories of effects defined in the Accounting Standards Codification 230-10-45-28 and International Accounting Standards 7.18 (Statement of Financial Accounting Standards No. 95) in regard to the indirect method, which makes the concept of reconciliation between the accrual- and cash-basis more thorough and complete. The paper provides an approach to teaching the concept of the reconciliation of accrual- and cash-based accounting methods.

scholarly journals The Preference of Direct or Indirect Methods in Preparing the Statement of Cash Flows in Decision Making: An Academic Perspective

2016 ◽  
Vol 8 (2) ◽  
pp. 206
Author(s):  
Abdullah, S. Hardan ◽  
Majed, A. Qabajeh ◽  
Aymen, M. Alshanti
Keyword(s):  
Decision Making ◽  
Indirect Method ◽  
Direct Method ◽  
Cash Flows ◽  
Decision Makers ◽  
Academic Rank ◽  
Indirect Methods ◽  
Statement Of Cash Flows ◽  
Qualitative Characteristics ◽  
Academic Sector

Two methods are used when reporting cash flows from operating activities: the direct method or the indirect method, both are acceptable from IAS with a preference of direct method. Thus, this paper examines which method of reporting the statement of cash flows provides useful information the decision makers rely on for decision making purposes. To achieve this aim, participants were selected from academic sector represented by universities professors. The study is based on the conceptual framework: qualitative characteristics of accounting information. To be useful, information must be relevant and represents faithfully what it claims to represent. In order to distinguish more useful financial information from those less useful, enhancing qualitative characteristics were examined. Results show that academic professors provide support for direct method of reporting cash flows over indirect method. The study sought to determine the effect of academic rank on these results. Evidence reveals that full and associate professors endorsed the preference of direct method more than assistant professors and lecturers. These results recommend the legislative bodies and entities to adopt the direct method in preparation the statement of cash flows.

Analyzing Two Investments—An Instructional Case to Introduce Basic Financial Accounting Concepts

2018 ◽  
Vol 33 (4) ◽  
pp. 47-56
Author(s):  
Wendy J. Bailey ◽  
Janet A. Samuels
Keyword(s):  
Financial Reporting ◽  
Business Students ◽  
Balance Sheet ◽  
Cash Flows ◽  
Legal Aspects ◽  
Financial Accounting ◽  
Net Income ◽  
Income Statement ◽  
Orientation Session ◽  
Statement Of Cash Flows

ABSTRACT This case introduces basic financial accounting concepts to graduate business students in an accounting orientation session (i.e., “boot camp”). Students assume they have invested in two cupcake businesses in Paris and they now want to determine which business performed best. Instructors can use this case, which provides students an opportunity to compare two businesses, to achieve several learning objectives including those related to accrual accounting (i.e., when to record transactions), the legal aspects of business (i.e., company structure, stock ownership, international accounting), and the use of estimates in financial reporting (i.e., depreciation, bad debts). This case also introduces students to the three basic financial statements (i.e., balance sheet, income statement, statement of cash flows), and the evaluation of financial results (i.e., net income versus cash flow, ratios). We have found that this simple, straightforward case helps students feel more confident when working with basic financial accounting concepts.

Using accounting equation analysis to teach the statement of cash flows in the first financial accounting course

2000 ◽  
Vol 18 (2) ◽  
pp. 147-155 ◽  
Author(s):  
David O'Bryan ◽  
Kevin T Berry ◽  
Coleen Troutman ◽  
Jeffrey J Quirin
Keyword(s):  
Cash Flows ◽  
Financial Accounting ◽  
Equation Analysis ◽  
Statement Of Cash Flows

scholarly journals Back To Basics: Algebraic Foundations Of The Statement Of Cash Flows

2013 ◽  
Vol 7 (1) ◽  
pp. 93-98
Author(s):  
Donald T. Joyner ◽  
Jean-Marie Banatte ◽  
V. Reddy Dondeti
Keyword(s):  
Indirect Method ◽  
Business Students ◽  
Balance Sheet ◽  
Cash Flows ◽  
Black Box ◽  
Net Income ◽  
Undergraduate Level ◽  
Accounts Receivable ◽  
Accounts Payable ◽  
Statement Of Cash Flows

The indirect method for preparing the statement of cash flows, as described in many standard textbooks, involves an item-by-item approach, telling you to add to or subtract from the net income, the increases or decreases in the balance sheet items, such as accounts payable or accounts receivable. Many business students, especially at the undergraduate level, find these black-box-rules confusing. In recent years, several articles have appeared in the accounting literature, exploring the link between the algebraic foundations and the enumeration of items in the statement of cash flows. In this paper, an explanation is provided, through an analysis of the basic algebraic equation of the balance sheet, for the black-box-rules of the indirect method in a simple and concise manner.

PENGARUH INFORMASI LABA AKUNTANSI, ALIRAN KAS DAN KOMPONEN ALIRAN KAS TERHADAP HARGA SAHAM PADA PERUSAHAAN MANUFAKTUR DI INDONESIA

2005 ◽  
Vol 1 (2) ◽  
pp. 79
Author(s):  
Ferry Ferry ◽  
Erny Ekawati
Keyword(s):  
Stock Returns ◽  
Cash Flow ◽  
Stock Prices ◽  
Stock Price ◽  
Cash Flows ◽  
Negative Influence ◽  
Positive Influence ◽  
Financial Accounting ◽  
Statement Of Cash Flows ◽  
The One

Brfoo 1994, the one way measurcd pdormance of go public compa4y is earning afier tu, but on September 7, 1994 the Indonesian Institute olAccountants (IAI) published the statement of financial Accounting Standard (PSAK) No.2, "statement of Cash Flows" requires companiesto pubtish the statewent of cash flows beginning from January I, tggs. So investors had two kinds measurement of performance go public companies.The objective of study is to aplain the influence of informationcontent of accounting income, total cash Jlows, and components of cash flow with stock price in lidonesian manufacuring firms The accounting income is earning afiir ta,tc before extra ordinary item and discontinued operations and total cash flows is a sum of cash flow from operating activities, cash llow from investing activities, and cash tlow from financing activities.This study was constitute replicated study from Triyono and Yogiyanto (2000) about the association of information content of total cash flows, components of cash Jlows, and accoun:ting income with stock prices or stock returns. This study took sample frorn manufacnring firms lisfed in the Jakarta Stock Exciange @ni) from 1999-iOOZ tnoT"had pubtished aadited financial statement. Stock prices using monthly prices that hadended December 1999-2002. The statistics method used to test ltypotheses is a linier multiple regression. The model was considered: levek')odet.  The empirical results with using the first model levels about the influ. hence information of accounting income and total cash flows with stock prices can be explained accounting income gave positive influence and significant with stock prices whereas total cash flows gcMe negative and tlgnil*nt with stock prices. In the second model levels about the influ- ,i"i ,nyn *ation of cash flow from operating actiu.ities, cash flow from investing activities, and cash flow from financing octivities with stock pri, i* b" explained, separated total gash fl9ws into.yomponents. of 'cash flows gave negative influence and significant with stock prices "rp"ifolly iash ltoi from aperating octivities and c-ash flow from finincing activities. In the third model levels obout influence information of acciunting income and components of cash Jlows with stock prices irn be expliined, accounting income gave positive inlluence and significont with stock prices whereas companents of cosh tlows gNe negative influence and significant with stock prices'Keywords : accounting Income, cash Flows, components of cashflows, levels model

AKUNTANSI KEUANGAN DAN STANDAR AKUNTANSI

2019 ◽  
Author(s):  
Budi Gautama Siregar
Keyword(s):  
Cash Flows ◽  
Financial Accounting ◽  
Financial Position ◽  
Income Statement ◽  
Statement Of Cash Flows ◽  
Retained Earnings

Akuntansi Keuangan (Financial Accounting) adalah sebuah proses pembuatan laporan keuangan yang menyangkut kegiatan operasional perusahaan secara menyeluruh dan akan digunakan oleh pihak-pihak yang berkepentingan diantaranya investor, manajer, serikat pekerja, kreditor, dan lembaga pemerintahan. Laporan keuangan adalah sarana pengkomunikasian informasi keuangan kepada pihak-pihak eksternal. Laporan keuangan biasanya menyajikan sejarah berdirinya perusahaan, neraca (Statement of Financial Position), laporan laba rugi (Income Statement), laporan arus kas (Statement of Cash Flows), laporan perubahan modal (Retained Earnings Statement), dan dilengkapi catatan atas laporan keuangan atau penjelasan mengenai laporan keuangan yang disajikan. Standar Akuntansi Keuangan (SAK) adalah suatu kerangka dalam prosedur pembuatan laporan keuangan agar terjadi keseragaman dalam penyajian laporan keuangan.

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