The Quest for a New Method of Preparing the Statement of Cash Flows

An Examination of Chen Daben's Method.and A Dual View of Accounting

Abstract

The study of cash flow accounting generally involves two aspects, namely, the method of preparing the statement of cash flows and the underlying view of cash flow accounting. This author considers the two aspects to be in a complementary relationship. Chen Daben of China has proposed a method of preparing the statement of cash flows through the derivative method making use of specially tailored slips. Mr. Chen's method is an important contribution to scholarship concerning the preparation of the statement of cash flows and to the discourse on the view of cash flow accounting. His thinking, however, has yet to be proven theoretically viable. Moreover, his idea of cashflow journalizing as an addition to the kind of journalizing commonly known in accounting does not represent a full-fledged view of cash flow accounting, but rather reflects one that is dependent on the commonly used process of journalizing. In contrast to Mr. Chen, this author advocates a full-fledged view of cash flow accounting involving cash flow journalizing for all transactions, and asserts the viability of this method in both theoretical and practical terms. In addition, this author argues, in view of the ongoing revolution in information technology, that the disclosure of financial information thus derived can be implemented through computerized accounting without encountering serious problems. Finally, the author explores the possibilities for information disclosure, contending that the possibilities will not be confined to information based on a dual view of accounting as exemplified by Mr. Chen's argument, but will rather embrace multiple forms of financial information.