Section 1: 30–40%1A5
Statement of Cash Flows
Exam insight
The statement of cash flows appears on every FAR sitting - expect 3-4 questions. The AICPA's favorite trap describes a gain on an asset sale and asks where the cash goes. Many candidates pick 'operating' because the gain runs through net income. That's wrong: the full proceeds go in Investing, and you remove the gain from Operating entirely.
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What AICPA wants you to know
- 1Classify transactions as operating, investing, or financing activities
- 2Prepare the operating section using both the indirect and direct methods
- 3Identify non-cash transactions that must be disclosed separately
- 4Calculate cash flows from investing and financing using balance sheet changes
- 5Distinguish between free cash flow and cash provided by operations