should the accrued interest that increased the principle value of a guaranteed investment certificate prior to the maturity date, and which has not yet been deposited into the checking account, be reported now in the cash flow statement? I think not, but my partner thinks otherwise, and I'm in big trouble. Please help!

I would agree with you on this one, assuming that the cash flow statement in question was analyzing changes strictly in "cash", as in the checking account balance sense. It wouldn't be unreasonable, for certain purposes, to have a cash flow statement where "cash" was defined as cash plus all liquid, near-cash equivalents. In this latter case, accrued interest which increased the balance of, say, a CD investment, would indeed be included as an "increase".

But again, if the focus of the cash flow statement in question was strictly "cash", accrued interest wouldn't be counted as an increase until it hit the checking account. Note, however, if the accrued interest was included in net income---which itself is treated as an increase to cash on the statement---you'd need to pull the accrued interest back out of cash flow as a separate reconciling adjustment.

Thanks arcsine for taking the time to answer my question.