What is the proper treatment of restricted cash in the proprietary fund statement of cash flows?

Restricted cash refers to funds that are set aside for specific purposes and cannot be used for general operational needs. In the context of a proprietary fund statement of cash flows, the proper treatment is to report restricted cash separately from unrestricted cash.

This separation is essential because it provides a clear understanding of the available liquidity and the constraints on cash usage. By distinguishing restricted cash from cash, users of financial statements can better assess the financial position of the entity and understand the extent to which cash resources are accessible for general operations. This segregation also aligns with accounting principles that emphasize transparency and the accurate representation of all financial resources and obligations.

Overall, by reporting restricted cash separately, entities comply with accounting standards while providing clearer information to stakeholders about how cash is being managed and any limitations that exist on its use.