Discuss the format of a statement of cash flows prepared using the indirect method

What will be an ideal response?

Regardless of format used the statement of cash flows shows changes over time
rather than the absolute dollar amount of the accounts at a point in time. Because a balance sheet balances, the changes in all of the balance sheet accounts balance, and the changes that reflect cash inflows less the changes that result from cash outflows will equal the changes in the cash account.The statement of cash flows is prepared in exactly that way: by calculating the changes in all of the balance sheet accounts, including cash; then listing the changes in all of the accounts except cash as inflows or outflows; and categorizing the flows by operating, financing, or investing activities. The inflows less the outflows balance to and explain the change in cash. FASB allows firms to calculate cash from operating activities using either the direct or the indirect format. The indirect method starts with net income and adjusts for deferrals; accruals; noncash items, such as depreciation and amortization; and nonoperating items, such as gains and losses on asset sales. The net income number is converted from an accrual-based amount to a cash-basis amount called cash from operating activities.