Dear Taku,

Thank you for your twelfth message. My comments follow.

Sincerely,

Prof. Sue Stiner

> Takumi Kimoto wrote:

> Dear Dr. Stiner,

> Thank you for your reply.

> Home work

1. Why is the Statement of Cash Flows so important to U.S. users of

accounting information?

> ・U.S investors respond to changes in cash flows.

> ・Cash flow information helps creditors decide if the borrower can repay

> the loan.

> ・U.S.lenders will not lend funds unless they believe they can recover

> them. A cash flow statement that shows a good cash increase from the

> main business of the company is very helpful.

Correct!

2. What is the main difference between the indirect and direct methods

of developing cash flow statements?

> I think most difference between the indirect and direct is Operating

Activities.

> Direct of Operating Activities is

Independently analyzes each balance sheet non-cash account for changes

caused by cash transactions.

> Indirect of Operating Activities is

> ・Starts with Net Income on the Income Statement.

> ・Cash transactions omitted from income are included.

> ・Non-cash transactions included in income are removed.

> ・This is called a "reconciliation to Net Income."

Correct!

3.How do Japanese companies report their changes in cash during the

year?This source may help in answering this question:

> http://www2g.biglobe.ne.jp/~ykawamur/n980107.htm

> It is an unofficial source of Japanese accounting information.

> The concept of funds is based on a narrower view, which limits the funds

> only to cash and cash equivalents. The format is based on three sections

> of cash flows from operating, investing, and financing activities.

> The direct method and indirect method are alternatively allowed.

Japanese companies generally do not show a cash flow statement.

> I'm looking forward to hearing from you.

> Have a nice day.

> sincerely Taku.

This week we will talk about (1) what a CPA does, (2) how to become a

CPA, and (3) the professional organizations for CPAs. The new lesson is

here:

http://www72.homepage.villanova.edu/susan.stiner/cgu/CPArole01.htm.

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