The numerical amount of the change in cash resulting from the company’s daily operations is not impacted by this reporting choice. According to FASB, that information can be presented within the statement of cash flows by either of two approaches: the direct method or the indirect method. Question: The net cash inflow or outflow generated by operating activities is especially significant information to any person looking at an organization’s financial health and future prospects. Compute the cash inflows and outflows from common revenues and expenses such as sales, cost of goods sold, rent expense, salary expense, and the like.Identify common “connector accounts” that are used to convert accrual accounting figures to the change taking place in the cash balance as a result of these transactions.

List the income statement accounts that are removed entirely in computing cash flows from operating activities and explain that procedure when the direct method is applied.List the steps to be followed in determining cash flows from operating activities.Indicate the method of reporting cash flows from operating activities that is preferred by FASB as well as the one that is most commonly used.Identify the two methods available for reporting cash flows from operating activities.At the end of this section, students should be able to meet the following objectives:

Cashflow statement by direct method