ACCT303 Chapter 4B - Statement of Cash Flows, teaching pp

ACCT303 Chapter 4B - Statement of Cash Flows, teaching pp -...

Info iconThis preview shows pages 1–12. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapters 4 B Statement of Cash Flows
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Statement of Cash Flows 2 Objectives of this Chapter I. Identify business activities which can generate or use cash and differentiate between income flows (i.e., accrual basis) and cash flows from operating activities. II. The Importance and the usefulness of the statement of cash flows.
Background image of page 2
Statement of Cash Flows 3 Objectives of this Chapter (contd.) III. Learn how to prepare the statement of cash flows. VI. The “cash burn rate” and the use of this rate in evaluating the financial viability of start-up companie s. V. Learn the two alternatives (direct and indirect methods) in preparing net cash flows from operating activities.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Statement of Cash Flows 4 I. Activities which can either generate cash or use cash for a business entity A. Operating activities. B. Investing activities. C. Financing activities.
Background image of page 4
Statement of Cash Flows 5 A. Operating Activities (i.e., sales revenue, expenses) All these activities are reported in the I/S (income statement). However, I/S only provides the accrual-basis net income (revenue –expense + gains – losses ) which very often is not the change in cash. Therefore, we need to adjust from net income flows to cash flows in order to report the net cash provided by (or used in) operating activities .
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Statement of Cash Flows 6 A. Operating Activities (contd.) There are two approaches to reconcile net income to net cash provided by (or used in) operating activities: 1. Indirect Method ==> Lump-Sum Adjustment 2. Direct Method ==> Individual Account Adjustment
Background image of page 6
Statement of Cash Flows 7 1. Indirect Method Adjust net income (the lump sum amount of all revenues and expenses) for all differences between income flows and cash flows.
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Statement of Cash Flows 8 2. Direct Method Adjust each revenue account to cash collection and adjust each expense account to cash payment. Subtract total cash payments from total cash collections to derive net cash flows of the operation activities. SFAS No. 95 allows a choice between the direct and indirect approach for the cash flow statement
Background image of page 8
Statement of Cash Flows 9 Cash flows from operating activities Cash Inflows: 1. Collections from customers including cash received from sales (or services) and collections of A/R. 2. Cash receipts of interests or dividends. 3. Collections of other operating receipts (i.e., unearned revenue, rent revenue).
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Statement of Cash Flows 10 Cash Flows from Operating Activities (contd.) Cash Outflows: 1. Payments to suppliers. 2. Payments to employees. 3. Payments for interest expense. 4. Payments for income taxes. 5. Payments for other expenses(i.e., Prepaid expenses; rent expenses).
Background image of page 10
11 Activities which can either generate cash or use cash for a business entity A. Operating activities. B. Investing activities.
Background image of page 11

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 12
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 09/30/2011 for the course ACCT 303 taught by Professor Staff during the Spring '11 term at S.F. State.

Page1 / 81

ACCT303 Chapter 4B - Statement of Cash Flows, teaching pp -...

This preview shows document pages 1 - 12. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online