Cash paid for income taxes Net cash flow from operating activities INVESTING

Cash paid for income taxes net cash flow from

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Cash paid for income taxes Net cash flow from operating activities INVESTING SECTION Sale of equipment Purchase of equipment Purchase of investment Sale of investment Net cash flow from investing activities FINANCING SECTION Paid off notes payable Issue notes payable Sale of common stock Paid cash dividend Net cash flow from financing activities Net increase (decrease) in cash Cash at the beginning of the period Cash at the end of the period
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Statement of Cash Flows – Direct Method GIANTS CORP STATEMENT OF CASH FLOWS OPERATING SECTION Cash received from customers Cash paid for inventory Cash paid for wages Cash paid for insurance Cash paid for interest Cash paid for income taxes Net cash flow from operating activities INVESTING SECTION Sale of equipment Purchase of equipment Purchase of investment Sale of investment Net cash flow from investing activities FINANCING SECTION Paid off notes payable Issue notes payable Sale of common stock Paid cash dividend Net cash flow from financing activities Net increase (decrease) in cash Cash at the beginning of the period Cash at the end of the period
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Preparing the Operating Section The indirect method: 1. Start with net income 2. Adjust net income for “non-cash” revenues/gains and expenses/losses 3. Adjust net income for changes in current assets and current liabilities 4. Sum amounts to get net cash from operating activities Adjust net income (accrual) to arrive at operating cash flows (cash) Most common examples include depreciation expense and gains/losses on sales of assets
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Quick Review SUBTRACT from net income ADD to net income ADD to net income SUBTRACT from net income CURRENT ASSETS CURRENT LIABILITIES INCREASE DECREASE ΔCash = Δ Liabilities + Δ Stkhlders’ Equity Δ Non-cash Assets - Fill in the following matrix
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Is the increase to accounts receivable added to or subtracted from net income when preparing the statement of cash flows using the indirect method? Is the increase to salaries payable added to or subtracted from net income when preparing the statement of cash flows using the indirect method? Quick Review Accounts receivable xx Sales xx How does the JE affect NI? Increases What affect does the JE have on cash? No Effect Subtract the change in A/R to reverse out the accruals. Salaries expense xx Salaries payable xx How does the JE affect NI? Decreases What affect does the JE have on cash? No Effect Add the change in S/P to reverse out the accruals.
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Prepare the Statement of Cash Flows using the Indirect Method FOUR STEPS 1. Start with Net Income 2. Adjust for non-cash revenues, gains, expenses, and losses 3. Adjust net income for changes in current assets and liabilities 4. Sum amounts to arrive at operating cash flow Type of Activities
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Change in Account FOUR STEPS 1. Start with Net Income 2. Adjust for non-cash revenues, gains, expenses, and losses 3. Adjust net income for changes in current assets and liabilities 4. Sum amounts to arrive at operating cash flow Type of Activities
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FOUR STEPS 1. Start with Net Income 2.
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  • Winter '18
  • jane smith

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