Critical Thinking Cash Flow Statement

Question: Discuss about theCritical Thinking for Cash Flow Statement. Answer: Introduction A statement of the cash flows is the statement that has been required to be prepared by the generally accepted principles of accounting. And these form the part of the financial statements. Hence, the annual reports of each of the company usually includes this statement for mainly 2 or 3 years. This data helps in the analysis of how much flew out of the company and how much cash flew into the company. When the company knows the amount of the cash that went out and into the company, then it is able to predict the future amount of the cash that would flow into and out of the company. It helps in assessing the future needs of cash for the company. When cash flow statements are being presented, then the majority of the companies help in combing the cash and its equivalents since the short term investments are always classified as the cash equivalents and are used as a substitute for cash (Wiley, 2016). Preparation of the cash flow statement does not only provide the information that is readily available from the other financial statements but through a series of reconciliation between the beginning and the ending balances of cash and cash equivalents. The main aim of this statement is to report on the changes in the cash and the cash equivalents in the entity in the period of accounting. This statement also shows the historical changes in cash instead of the working capital. It provides the information about the borrowings of the company and the activity of debt repayment (Boundless, 2016). Cash forms the very basis of each business. Without the same, a business cannot survive. There is this simple logic which follows that in case a customer is able to generate enough cash, then it would be able to meet its trade obligations. The main aim of the cash flow statement is the identification of the quality of the earnings of the company. There is an increased correlation between the income and the cash flow for the company. The higher the income of the company, the higher would be its cash flows and the higher would be its quality of the earnings (CRF online, 2016). Any company could easily look at the cash flow statement for it for 3 years, and in case they have been increasing, then there is a higher probability that the future cash flows would also increase and in case, there is a decrease, then there would be a decrease in the future earnings as well. Accounting and historians: Accounting involves the use of critical thinking and analysis. There has to be a very quick grasp of the various accounting standards and their application must be on the finger tips. Critical thinking and analysis are the very basis for the work of a historian too. They are the people that are engaged in teaching and conduct their researches. They use their skills to interpret the sources such as the letters, films, photographs, etc. they are the ones that considers what exactly these sources reveal about and this is somewhat similar to the accounts professionals that reveal some information about the financial statements. They exist within the humanity in their most recent and not so recent past. They evaluate and then assess what has been laid down in front of them (Griffith, 2016). Economics and accounting: Accounting and economics go hand in hand. They both aim at maximum utilisation of the scarce resources such as cash. They deal with the wealth and hence, they are very much in line when it comes to the calculation of income. Accounting and mathematics: they also go hand in hand since they both deal in numbers and aim at maximising the amount of the earnings or the profits for the business. They believe in light hand side must be equal to the right hand side and the accountants believe in the accounting equation of Capital + liabilities = Assets. Accounting and statistics: accounting is not just playing with the accounting information but it involves the interpretation and the presentation of the financial information and tables and graphs based on it. This is what is actually done in statistics. If an accountant knows the trend in the cash flows, he would be able to figure out the ways through which the same could be improved. Accounting and management: management is all about managing the different affairs of the business. It is getting things done in the most systematic and planned manner. It involves all the activities such as planning, organising, directing and controlling. Without management, the cash flows of the company cannot never be improved and they can never be forecasted (Fareed Siddiqui, 2016). References: Cash flow statement. (2016).www.wiley.com. Retrieved 27 September 2016, from https://www.wiley.com/college/bcs/0471238236/king/ch13.pdf Griffith Graduate Attributes Critical Evaluation Skills Toolkit. (2016).www.griffith.edu.au. Retrieved 27 September 2016, from https://www.griffith.edu.au/__data/assets/pdf_file/0004/290659/Critical-evaluation-skills.pdf How Accounting Is Linked With Other Disciplines. (2016).Fareedsiddiqui.expertscolumn.com. Retrieved 27 September 2016, from https://fareedsiddiqui.expertscolumn.com/article/how-accounting-linked-other-disciplines Key Considerations for the Statement of Cash Flows. (2016).Boundless. Retrieved from https://www.boundless.com/accounting/textbooks/boundless-accounting-textbook/detailed-review-of-the-statement-of-cash-flows-14/cash-flow-accounting-89/key-considerations-for-the-statement-of-cash-flows-400-5478/ The Trade Creditor's Guide to the Statement of Cash Flows. (2016).www.crfonline.org. Retrieved 27 September 2016, from https://www.crfonline.org/orc/cro/cro-10.html