Section 1: 30–40%1A5
Statement of Cash Flows
Cash flows shows up on every single FAR sitting — count on at least 3-4 questions. The AICPA's favorite trap: they describe a gain on asset sale and ask where the cash goes. Most candidates say 'operating' because the gain hits net income. Wrong — the full proceeds belong in Investing, and you remove the gain from Operating entirely.
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