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This computer based instruction tutorial teaches students how to develop a Statement of Cash Flow (SCF) from given balance sheet and income statement information.
The module was developed using Authorware Professional 4.0. It takes approximately 1-2 hours for students to complete the lesson.
The Statement of Cash Flow is one of the more difficult concepts to teach in an Introductory Financial Accounting course. Students often find the underlying concepts confusing, particularly after using accrual accounting techniques for several weeks to prepare balance sheet and income statement information. This CBI lesson helps students to understand the type of information communicated by the SCF. They also learn relevant procedures for preparing the SCF at their own pace, and the lesson provides interactive exercises and feedback to allow students to test and reinforce their learning.
The lesson is divided into six modules: an introduction, a review of accrual accounting concepts and their effects on the balance sheet working capital accounts and related income statement accounts, three separate modules on how to calculate cash flow from operations, investing, and financing activities respectively, and a final section on interpreting the finished SCF.
The lesson is designed to show financial information necessary to prepare the SCF on one screen, as well as instructional narrative and student feedback. The screen shows a Balance Sheet and Income Statement on the right side. Related general ledger accounts are shown in the bottom left portion of the screen. Instructional narrative and student input occurs in a box in the top of the screen. The Statement of Cash Flow is constructed in the centre of the screen through animations.
Journal entries are used to illustrate how cash effects which result in changes to non-cash balance sheet accounts can be used to develop the SCF. Balance sheet changes from one year end to the next are classified as operating, investing, or financing activities and journal entries to account for these changes are constructed in the narrative portion of the screen. The resulting journal entry amounts are then ?posted? to the general ledger accounts on the left hand side of the screen by means of animation, and ending balances in these G/L accounts are automatically calculated which agree to the ending balances on the balance sheet.
Any entries that affect the Cash and Cash Equivalents general ledger account are then transferred to the SCF by means of animation. In this way, students learn how to classify various balance sheet accounts as affecting operating, investing, or financing activities on the SCF, re-construct summary journal entries, see how changes to these accounts affect cash flow, and prepare the SCF based on this information.
There are other types of interactions included in the lesson besides animations. Students are required to calculate and enter the amounts of changes to various balance sheet accounts, and indicate whether these changes increase or decrease cash. Answers are evaluated, and students are prompted to re-try incorrect answers. A limited number of attempts is allowed before students are given appropriate feedback.
Students are also required to select what sections of the balance sheet are applicable to operating, investing, or financing activities by clicking on the portions of the balance sheet. These responses are evaluated for appropriateness. A section in the introductory portion of the lesson also gives students practice in determining what types of balance sheet accounts can be considered Cash and Cash Equivalents for purposes of the SCF,
and the relevant classification criteria.
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