Statement of Cash Flows Paper
This paper will answer question one from the end of chapter 23. The question has two parts. The first part asks, “What is the purpose of the statement of cash flows?” (Kieso, Weygant, & Warfield, 2004). The second part of the question asks, “What information does it (the statement of cash flows) provide?” (Kieso, et al., 2004). This paper will also include an explanation of why statements of cash flows are important when assessing the financial strength of an organization.
According to the text, the main purpose of for the statement of cash flows is to “provide information about an entity’s cash receipts and cash payments during a period” (Kieso, et al., 2004). A secondary, but still important, reason for the statement of cash flows is also mentioned in the text. The statement of cash flows provides information on a cash basis about an organization’s operating, investing and financing activities. (Kieso, et al., 2004)
The statement of cash flows provides a great deal of information. The information includes cash receipts of an organization, cash payments an organization makes as well as the net change in cash from operating activities, investing activities and financing activities. This information is provided for a period of time and is formatted in such a way that the beginning cash balances are reconciled with the ending cash balances. (Kieso, et al., 2004)
Statements of cash flows have the important task of providing information about the financial strength of an organization. There are several types of information that can be determined by scrutinizing the statement of cash flows that can help investors, creditors and other users asses the financial strength. (Kieso, et al., 2004)
The first is that the sta ...