The statement of cash flows is organized into three sections: operating activities, investing activities, and financing activities. Cash from operating activities includes transactions that affect net income. Net income is computed indirectly by taking net income from the income statement and excluding non-cash and non-operating transactions, or directly from cash received and paid through normal business operations. The cash flow statement reports sources and uses of cash over a period of time.

1. Describe the organization of the statement of cash flows. And how do you compute net income?
Solution
The cash flow statement reports the company's major sources and uses of cash during a period
of time. The Cash Flow Statement is organized into three major sections: Cash from Operating
activities (transaction entered in determining net income), cash from investing activities
(involves acqusition and sale of long-term assets) and cash from financing activities (borrowing
or lending long term debt or capital). There can be one more activity i.e. Supplemental
information such as interest paid, income taxes paid, and significant noncash exchanges. Net
income relates to the above mentioned cash from operating activities. It can be computed
Indirectly (using Nt income from profit & Loss and than excluding non cash and non operating
transaction) or Directly (Cash received and paid in normal business activities).