26
2.2.2 Objective of Statement of Cash Flow
Based
on
Hoggett,
Edwards
and
Medlin
(2003,
p.940)
the
objective
of
cash
flow
statement
is
to
report
the
change in
cash
flow
which
include
the
cash
inflows
and
outflow
of
an
entity
classified
by
operating,
investing
and
financing activities. On the other hand, according to Horngren et al (2002,
p.407) statement of cash
flow plays a
vital role in an enterprise since it shows
the relationship of net income to changes in cash balances. In addition,
statement
of
cash
flow
provides
external users
with
useful
information
which
enable
them
to
measure
the
enterprise ability
to
fulfill
its
obligations
to
shareholders (dividends), creditors
(interest) and government (taxes and
charges),
evaluate
company’s
potential
ability
to
generate
positive
net
cash
flow,
discover
of what
is
needed
by
the
entity
and
find
out
the
reason
of the
difference occur between the net profit after tax and associated cash inflow and
outflow.
2.2.3 The implication of Statement of Cash Flow in Indonesia.
PSAK (Peraturan Standar Akuntansi Keuangan) is the benchmark of how
accounting should be done in Indonesia. When referring to PSAK (2007), the
statement of cash flow in Indonesia is ruled by PSAK number 2 and was
effectively
applied
on
1st
January
1995.
The
implementation
of
PSAK
toward
the statement of cash flow in Indonesia was adopted based on IAS 7 which
causes
the
cash
flow
standards
to
be
similar.
To
what
we
can
conclude,
both
 |