Statements and presentation

The Cash Flow Map

Every flow lands in operating, investing, or financing by its nature, and non-cash deals go only in the schedule.

How the exam words it

-The stem asks how a transaction 'should be reflected in the statement of cash flows' or which item 'would be reported as a FINANCING activity'.
-It gives net income and a list of adjustments and asks for cash flow from operations under the indirect method.
-Assets are acquired by issuing debt or stock, or bonds convert to stock, with no cash moving.
-An NFP receives a donor-restricted gift and asks how the receipt 'is classified' on the cash flow statement.

1Map by nature: operating follows the income statement, investing is long-lived assets and investments, financing is debt principal and equity.
2Indirect method: start with net income (change in net assets for an NFP), add back non-cash charges, subtract gains, and adjust for working capital changes.
3Report the full proceeds of a sale in investing and subtract the gain from operating; pure non-cash exchanges go only in the supplemental schedule.
4NFP twist: donor-restricted gifts for endowment or capital assets are financing; short-term purpose-restricted gifts stay in operating.

Showing only the gain in investing. The full proceeds are the investing inflow, and the gain is subtracted from operating so it is not counted twice.

The same pattern, re-skinned along these axes:

Classify a flow versus compute operating cash flowCash transaction versus non-cash schedule itemCorporate statement versus NFP statement

8 questions of The Cash Flow Map from across the AUD topics. Clear it by getting 5 right with a streak of 3.