Statement of Cash Flows

Statement of Cash Flows Spreadsheet

An optional spreadsheet for preparing the statement of cash flows is useful in analyzing accounts, retained earnings, and other accounts.
Numerous adjustments or other complex issues associated with the statement of cash flows are best served with the use of an optional worksheet that serves as a tool in the preparation of the statement, using the indirect method. The worksheet allows a company to classify data that may appear on the statement of cash flows.

Reconciliation Worksheet Format

A reconciliation worksheet is not a formal accounting record of a company. However, it can be a valuable tool to assemble and analyze data for preparing the statement of cash flows.
A detailed situation is presented for Morgan Company to demonstrate how this works. Data from the bottom part of the worksheet provides all the information needed to prepare a formal statement of cash flows using the indirect method.

The steps for preparing the worksheet are as follows:

Step 1: For both previous and current end-of-year, list the debit balance accounts and amounts on the top part of the worksheet (balance sheet section) and total, followed by the credit balance accounts and amounts and then the total.

Step 2: In the reconciling amount columns, list the debit and credit amounts that explain the changes in the accounts. It is a good idea to index each change with a number or letter to help understand the effects or for later journal entry preparation.

Step 3: Compute the increase or decrease in cash and enter it on the cash line at the bottom of the worksheet.

A problem for Morgan Company is presented, along with the reconciliation spreadsheet. The comparative balance sheets, income statement, and additional transaction data are shown for Morgan Company, which are needed to prepare the worksheet.

After the organization has determined the differences between beginning and ending balances of the balance sheet accounts, it can place these differences in the debit and credit columns of the spreadsheet and total the reconciling columns. It is a good idea to index the transactions with numbers or letters in order to trace both the debit and credit sides of the transactions. If completed correctly, the reconciling columns of the worksheet should balance.

Comparative Balance Sheets

The comparative balance sheets information for the Morgan Company is needed to construct a reconciliation spreadsheet used to prepare a statement of cash flows presentation using the indirect method.
Also needed is the income statement for Morgan Company and additional transaction data.

Income Statement and Additional Data

The income statement for Morgan Company with additional transaction data is also needed to construct a reconciliation spreadsheet for a statement of cash flows presentation using the indirect method.
Finally, the complete reconciliation worksheet—spreadsheet for preparation of statement of cash flows—is prepared. The reconciliation worksheet is used to prepare the formal statement of cash flows for Morgan Company for 2020.

Spreadsheet for Preparation of Statement of Cash Flows - Part 1

A reconciliation spreadsheet for a company is constructed using data from the comparative balance sheets, income statement, and additional data. This information is later used to prepare a statement of cash flows. The first half is shown here.
From the complete reconciliation spreadsheet, specifically the bottom half beginning with Operating Activities, the final formal statement of cash flows for Morgan Company can be prepared afterward.

Spreadsheet for Preparation for Statement of Cash Flows - Part 2

The second half of a spreadsheet for preparation for statement of cash flows lists the statement of cash flows effects. This information is used to prepare a final statement of cash flows.
Drawing on financial information from the prior spreadsheet for preparation of statement of cash flows, the final formal statement of cash flows for Morgan Company is prepared.

Statement of Cash Flows - Indirect Method

The formal statement of cash flows for the Morgan Company (2020) was prepared using data from the reconciliation worksheet, specifically the bottom half beginning with Operating Activities.