Final answer:
The Statement of Cash Flows for proprietary funds must include three categories of cash flow: operating, financing, and investing. It also allows for both the direct and indirect method of reporting and requires a reconciliation to illustrate differences between operating income and operating cash flows.
Step-by-step explanation:
Regarding the Statement of Cash Flows for proprietary funds, it is true that:
- Three categories are required: operating, financing, and investing.
- Interest receipts and interest payments are to be reported as cash flows from operating activities.
- Either the direct or indirect method may be used.
- A reconciliation must be presented that illustrates the differences between operating income and cash flows from operating activities.
The Statement of Cash Flows for proprietary funds is designed to provide a detailed overview of how cash is generated and used by an entity. These requirements ensure that entities present a full picture of their cash situation in a standardized format that is useful for analysts, investors, and other stakeholders.