Teaching the Indirect Method of the Statement of Cash Flows in Introductory Financial Accounting: A Comprehensive, Problem-Based Approach

Abstract

In this article, the authors provide an instructional resource for presenting the indirect method of the statement of cash flows (SCF) in an introductory financial accounting course. The authors focus primarily on presenting a comprehensive example that illustrates the "why" of SCF preparation and show how journal entries and T-accounts can be used in the analysis of the impact on net income and/or cash for each transaction in their example. This approach can be viewed as an alternative to the methods illustrated in the accounting education literature and commonly used financial accounting textbooks.