Cash flows chart

Cash flows chart - income statement • plus increases...

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Overview of cash flows Item Accrual Cash--direct Cash--indirect Revenues: Sales revenue Record when earned and there is reasonable assurance of collection. INFLOW Recorded when collected. i.e., Cash sales plus collections on accounts receivable. An other way to look at it: Beginning A/R plus sales = cash available for collection less ending A/R INFLOW Net income (which includes revenue) from income statement plus decreases in A/R minus increases in A/R Expenses: Cost of goods sold Record when used up or sold, not when inventory is purchased OUTFLOW Record only cash pmts for inventory, i.e., inventory purchased for cash and payment on accounts payable. Another way to look at it: Cost of goods sold Plus ending inventory Plus beginning accounts payable =maximum possible cash payment to suppliers Less beginning inventory Less ending accounts receivable = cash paid to suppliers OUTFLOW Net income (which is measured after COGS is deducted) from
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Unformatted text preview: income statement • plus increases inventory • plus decreases in A/P • minus decreases in inventory • minus increases in A/P Revenue: Service revenue Record when earned and collectible INFLOW Record when cash received, even if not earned, i.e., services for cash, collections of cash for unearned service revenue, collections of accounts receivable. INFLOW Net income (which includes service revenue) • plus increases in unearned revenue • minus decreases in unearned revenue • minus increases in accounts receivable • plus decreases in accounts receivable Expenses: Wages payable Record when work is completed. OUTFLOW Record when cash is paid to employees, i.e, work for cash or decrease in wages payable. OUTFLOW Net income (from which wage expense is already deducted) • plus decreases in wages payable • minus decreases in wages payable...
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Cash flows chart - income statement • plus increases...

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