Appendix 21B: The T-Account Method of Preparing the Statement of Cash Flows
{"Image DocumentName": "Appendix 21B: The T-Account Method of Preparing the Statement of Cash Flows", "Image ImageDescription": "Draw a T-account for each income statement and balance sheet account. The T-account for cash should be drawn considerably larger. Enter each account\u2019s net change on the appropriate side (debit or credit) of the uppermost portion of each T-account. Reconstruct the transactions that caused changes in each account balance during the year and record the entries for those transactions directly in the T-accounts. After all account balances have been explained by T-account entries, prepare the statement of cash flows from the cash T-account, being careful also to report noncash investing and financing activities. The T-account method serves the same purpose as a spreadsheet in assisting in the preparation of a statement of cash flows. The following five steps outline the T-account method: Draw a T-account for each income statement and balance sheet account. The T-account for cash should be drawn considerably larger. Enter each account\u2019s net change on the appropriate side (debit or credit) of the uppermost portion of each T-account. Reconstruct the transactions that caused changes in each account balance during the year and record the entries for those transactions directly in the T-accounts. After all account balances have been explained by T-account entries, prepare the statement of cash flows from the cash T-account, being careful also to report noncash investing and financing activities.", "Image XResolution": "37", "Image YResolution": "37", "Image ResolutionUnit": "Pixels/Centimeter", "Image Software": "SlidePlayer", "Image YCbCrPositioning": "Centered"}