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Statement of cash flows

FAR Chapter 3 · Area I · Blueprint I.A.5

The statement of cash flows is one of the most reliably tested statements in FAR and a favorite for simulations. The Blueprint asks you to prepare it under both the direct and the indirect method and to correct errors in it. The skill is mechanical: classify each cash flow into one of three sections, and convert accrual numbers to cash. Practice makes these marks close to certain.

In this chapter

1. Purpose and the meaning of cash
2. Classifying cash flows
3. Operating activities: the indirect method
4. Investing and financing activities
5. Operating activities: the direct method
6. Noncash transactions and required disclosures
7. Special classifications and fixing errors

This chapter has 7 lessons, 50 practice MCQs with explanations and 11 simulations, plus flashcards and a recall sheet.

What this chapter covers

• Indirect method
• operating, investing and financing
• required disclosures
• the effect of transactions on cash flows

Chapter 2: Comprehensive income, changes in equity and the notes · Chapter 4: Consolidated financial statements