Noncash Investing and Financing Activities

Businesses sometime engage in transactions not affecting cash. In this case, cash is not affected, and this
transaction would not be reported in the body of the statement of cash flows. This transaction, referred to
as a noncash investing and financing activity, would instead be disclosed either at the bottom of the
statement of cash flows or in a note to the financial statements.

Presentation Formats for the Statement of Cash Flow

 Must report cash flows from operations, investing, and financing for the current year and the prior
two years
 Must report the beginning and ending cash balances, and the change in the cash
 Within the investing and financing cash flow, record the gross inflows and outflows
o Show the amount of cash spent to acquire property, plant, and equipment for the year
separately from the amount of cash received on sales of property, plant, and equipment
during the year
 Do not report nonmonetary (non cash transactions)
o The acquisition of equipment in exchange for shares of stock.

CASH FLOW FROM OPERATING ACTIVITIES

The statement of cash flows reconciles net income with cash flow from operations
 Direct method
o Reports the amounts of cash received from customers less cash disbursed to suppliers,
employees, lenders, and taxing authorities
 Indirect method
o Begins with net income for a period and presents adjustments to net income for revenues
and expenses not matched with cash receipts from customers or disbursement to suppliers
of goods and services in the current period.

The following template should prove helpful to you in preparing the operating activities of the
statement of cash flows using the indirect method.