chapter12notes

Chapter12notes - Chapter 12 Cash Flow Statements Accrual Basis vs Cash Basis Accounting Decrease in A/R Increase in A/R Increase in A/P Decrease in

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Chapter 12- Cash Flow Statements Accrual Basis vs. Cash Basis Accounting Decrease in A/R Increase in A/R Increase in A/P Decrease in A/P
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Example: The following information has been developed by the bookkeeper of the Sneed Co. It relates to the company’s operations for 2006. Cash Receipts from customers $46,100 Cash disbursements for expenses 10,600 Account balances as of Dec. 31 2005 2006 Accounts Receivables $10,400 $9,600 Accrued Expenses payable 1,900 1,600 Required: Prepare an income statement for the year ended Dec. 31, 2006. I. CASH FLOW STATEMENT
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Gives a detailed review of how the company's cash was used (outflows) and where the cash inflows came from. It reconciles the change in cash for the period. (It tells you what activities caused your cash balance to change throughout the year) A. 3 Major Sections of Cash Flow Statement 1. Operating Activities - Indirect Method Net Income Add: +Depr. & Amort. Exp. +Loss on Sale of PPE +Decreases in all CA +Increases in all CL Subtract: -Gain on Sale of PPE -Increases in all CA -Decreases in all CL Cash Flow from Operations xx 2. Investing Activities Add: Proceeds from Sale of PPE Proceeds from Sale of Investments Proceeds from Collection of Note Subtract: Purchase of PPE using CASH Note Receivable (Principle only) Cash Flow from Investing xx 3. Financing Activities Add: Proceeds from issuing Bonds Payable Proceeds from issuing Stock Subtract: Payment of Cash Dividends Pmt. of L-T Debt (principle only) Repurchase of Treasury stock Cash Flow from Financing xx CHANGE IN CASH XX (Add together: Cash Flow Operations + C.F. Investing +C.F. Financing = Change in Cash) Operating Activities Section: INDIRECT METHOD - Converts accrual-based net income back to cash 1. Start with Net Income
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2. Add back all items that DID NOT result in cash outflow (depreciation expense, amortization expense) 3. Add back: "loss on Sale of PPE" OR Subtract out: "Gain on Sale of PPE" 4. Look for changes in all current assets and current liabilities (this will convert revenues &
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This note was uploaded on 03/27/2008 for the course ACCT 229 taught by Professor Strawser during the Fall '06 term at Texas A&M.

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Chapter12notes - Chapter 12 Cash Flow Statements Accrual Basis vs Cash Basis Accounting Decrease in A/R Increase in A/R Increase in A/P Decrease in

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