Preparation Of The Statement Of Cash Flows In Accordance With IAS 7

Key words: accounting standards, cash and cash equivalents, cash flows, financing activities, investing activities, operating activities, statement of financial position.

ABSTRACT

Abstract: International Accounting Standard (IAS) 1: Presentation of financial statements, stipulates that the statement of cash flows is one of the primary annual financial statements to be prepared by every entity using the international financial reporting standards (IFRS). It should be given equal prominence as the other financial statements. This is a very important statement as it shows how much cash was generated from what sources and how that cash was utilised. IAS 7 Statement of cash flows details the provisions for the preparation of this very important statement. The amounts required in the preparation of this statements are not readily available from the financial accounts, and have to be calculated from the financial information available. The purpose of this article is to provide a step by step explanation regarding the preparation of the statement of cash flows. Both the direct and indirect methods are explained in some detail. It is hoped that both students and practitioners will befit from this exposition.

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