Final answer:
To prepare a statement of cash flows for government proprietary funds (enterprise and internal service), separate the cash flows into operating, investing, and financing activities and record the inflows and outflows for each category. Then, categorize the cash flows into major subcategories and summarize the net cash provided or used by each activity. Finally, present the net increase (decrease) in cash and cash equivalents for the reporting period.
Step-by-step explanation:
To prepare a statement of cash flows for government proprietary funds (enterprise and internal service), the following steps should be followed:
- Separate cash flows into operating, investing, and financing activities.
- Record cash inflows and outflows related to each activity.
- Prepare the statement of cash flows by categorizing the cash flows into major subcategories within each activity.
- Summarize the cash flows from each major subcategory to arrive at net cash provided (used) by each activity.
- Present the net increase (decrease) in cash and cash equivalents for the reporting period, as well as the cash and cash equivalents at the beginning and end of the period.
For example, if a government enterprise fund earns revenue from the sale of goods or services, that would be categorized as an operating activity. Investing activities may involve the acquisition or disposal of long-term assets, while financing activities could include issuing or repaying debt.