Preparation of the cash flow starts with profit before tax

Reference no: EM133612267

Question: Discuss

Reinstate briefly, what your classmate has discussed
Extend your classmate's posting with additional information
If available, suggest alternatives to your classmate's opinion.
The basic steps you will most likely include in preparing a Statement of Cash Flows are: a) What are the key steps in preparing the Statement of Cash Flows, using the indirect method?
Preparation of the cash flow starts with profit before tax.
Non cash expenses and income are adjusted
Changes in working capital are adjusted under operating activities
Tax payment is deducted in order to arrive at cash flow from operating activities
Cash flow from both financing and investing activities must be identified shown
The aggregate movement should match with closing cash and bank balance. b)What are the advantages of using the indirect method for reporting cash flows from operating activities?
The advantages of using the indirect method would be the fact that it is easier to prepare since it uses data from the balance sheet and income statement, it can be prepared right away. This method also provides reconciliation of profit before tax with cash flows, this method is just super simple.

Reference no: EM133612267

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