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ERIC Number: EJ1053808
Record Type: Journal
Publication Date: 2014
Pages: 6
Abstractor: As Provided
ISSN: ISSN-1942-2504
Back to Basics: Algebraic Foundations of the Statement of Cash Flows
Joyner, Donald T.; Banatte, Jean-Marie; Dondeti, V. Reddy
American Journal of Business Education, v7 n1 p93-98 2014
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.
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Publication Type: Journal Articles; Reports - Descriptive
Education Level: Higher Education; Postsecondary Education
Audience: N/A
Language: English
Sponsor: N/A
Authoring Institution: N/A
Grant or Contract Numbers: N/A