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Accounting, Finance, SPSS
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Statement of Cash Flows II Research Assignment Paper

Essay Instructions:

Module 4 - Case

Statement of Cash Flows

Assignment Overview

The main purpose of this module is to review the statement of cash flows in more detail.

Is there a difference between direct and indirect methods to make a statement of cash flows? Discuss and note two or three specific differences. Additionally, clearly

  • Distinguish between cash flows from operating activities and cash flows from investing activities.
  • Compare the statement of cash flows with income statement, using terms of net income and cash at end of the year.
  • Which of the two financial statements (income statement and statements of cash flows) is the better one? Explain your reasoning.
  • Comment on the differences between Apple’s and Samsung’s statement of cash flows. 

Assignment Expectations

The submission should be 3- to 5-pages and need to include answers to all the questions listed above. Show formula for computations, compare two financial statements, discuss the results, and include references in APA format.

When your paper is done, submit it.

AICPA or the National Association of State Boards of Accountancy (NASBA).

Required Materials

Accounting Concepts and Principles (2015) Pearson Learning  Solutions, New York

Accounting for McDonald’s  (2015) Pearson Learning  Solutions, New York

Accounting and the Business Environment (2015) Pearson Learning  Solutions, New York

Baruch College, The University of New York (2008). Guide to Financial Statements. This is a 45-minute interactive video presentation with audio. It is an excellent introduction and overview of financial statements. You do not have to watch the whole presentation at one time since it is easy to restart at different points. The information is also available in a PDF file.

Benedicto, M.S. (2008) Introduction to Financial Accounting. IE Business School. A multimedia presentation. The information is also available in a PDF file. Click on “Financial Statements" tab and "Practical Example" tab. Retrieved from http://openmultimedia(dot)ie(dot)edu/OpenProducts/financial_accounting/financial_accounting/frames.html

Read the appropriate chapters in the following text(s):

Edwards, J.D. & Hermanson, R.H. (2007) Accounting Principles: A Business Perspective. First Global Text Edition, Volume 1. Financial Accounting, pp. 6 – 37. Retrieved from http://dl(dot)dropbox(dot)com/u/31779972/Accounting%20Principles%20Vol.%201.pdf

Walther, L.M. (2010). Principles of Accounting: A Complete Online Text, chapters 1 and 2. Retrieved from http://www(dot)principlesofaccounting(dot)com/

Whitehead, G. (2008). Success in principles of accounting. Hodder Education. (read units 1, 2, and 3). Retrieved from EBSCO.

Optional Resources

Drake, P. (n.d.). Financial Ratio Analysis. Retrieved from http://educ(dot)jmu(dot)edu/~drakepp/principles/module2/fin_rat.pdf

SEC (2007). Beginner's Guide to Financial Statements. Retrieved from http://www(dot)sec(dot)gov/investor/pubs/begfinstmtguide.htm

Tutor2u (n.d.) is another website with presentations/notes that explain some basic accounting concepts. Retrieved from http://tutor2u(dot)net/sub_accounting.asp

Before you start the case you may want to try the quiz below to test your knowledge of accounting terminology. It is not graded and the answers are available.

Learn Accounting for Free. Accounting Basics Quiz | AccountingCoach.com, Retrieved from http://www(dot)accountingcoach(dot)com/online-accounting-course/60Dpg01.html

Understanding financial statements, Retrieved from: http://www(dot)bizzer(dot)com/images/Financial/

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Essay Sample Content Preview:
 
 
 
 
 
 
 
 
 
 
Cash Flow Statements
Name
Institution
 
 
 
 
 
 
 
 
 
 
 
 
Cash Flow Statements
            Cash flow statements represent financial statements that are a requirement for companies to report in any accounting period. They show how changes in income and balance sheet accounts affect cash and cash equivalents of a firm. It tells the shareholders about cash inflows to the company and how this cash is spent. It reveals a company’s efficiency and ability to honour its obligations as and when they arise. It is further split into cash flows from operating activities, investment and financing activities (Benedicto, 2008). This paper will present a discussion on the direct and indirect methods of preparing cash flow statements, differences between cash flows from operating and investing activities, a comparison of cash flows with income statements and the differences between Apple’s and Samsung’s cash flow statements.
Direct and Indirect Methods of Preparing Cash Flow Statements
            The direct method of preparing cash flows is simple and easily understood. However, FAS 95 prefers the indirect method and recommends it to be universally applied. The direct method reports major classes of gross cash received and those paid out. The dividends received may be reported as an operating or investing activity. If the taxes are directly related to operating activities, they are reported under the operating activities and under the investing and financing activities if they are related to these activities.
            The indirect method on the other hand uses net income and then makes adjustments for all the non-cash and cash based transactions. A further adjustment is done where asset account increments are subtracted from net income while liability account increments are added back to the net income. The method converts the accruals basis of net income into cash flows by using a series of additions and deductions based on the effect on cash on assets or liabilities (Benedicto, 2008).
Differences between Cash Flows from Operating and Investing Activities
            Cash flows from operating activities reflect how much cash is derived from the company’s good and services. This includes changes made in cash from accounts receivables and payables, depreciation and inventory. Certain adjustments are made by either subtracting or adding the differences in revenues, expenses and credit transactions from one period to another. These adjustments are made because not all items above involve actual cash inflows or outflows. The gains or losses from the sale of non-current assets are added back to the net income (Edward & Hermanson, 2007). ...
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