Statement of cash flows Carlos Mario Pardini Wong (A00829384) - Coggle…
Statement of cash flows
Carlos Mario Pardini Wong
Reporting Cash Flows
Reports a company’s cash inflows and outflows for a period.
Provides useful information about a company’s ability:
▪ Generate cash from operations
▪ Maintain and expand its operating capacity
▪ Meet its financial obligations
▪ Pay dividends
3 Types of cash flows activities:
Cash flows from operating activities are the cash flows from transactions that affect the net income of the company.
There's a direct and a indirect method
Cash flows from investing activities are the cash flows from transactions that affect investments in the noncurrent assets of the company.
Cash flows from financing activities are the cash flows from transactions that affect the debt and equity of the company.
Noncash Investing and Financing Activities
A company may enter into transactions involving investing and financing activities that do not directly affect cash.
Such transactions indirectly affect cash flows, they are reported in a separate section of the statement of cash flows.
Format of the Statement of Cash Flows
The activities are always reported in the same order.
Operating, investing and financing
No Cash Flow per Share
Sometimes reported in the financial press.
Normally computed as cash flow from operations divided by the number of common shares outstanding.
Cash Flows from Operating Activities—The Indirect Method
▪Adjustments to Net Income
Cash Flows from Investing Activities
Building and Accumulated Depreciation—Building
Cash Flows from Financing Activities
Dividends and Dividends Payable
Spreadsheet (Work Sheet) for Statement of Cash Flows—The Indirect Method
▪ Step 1. List the title of each balance sheet account in the Accounts column.
▪Step 2. For each balance sheet account, enter its balance. Place the credit balances in parentheses.
▪ Step 3. Add the December 31, 20Y7 and 20Y8 column totals, which should total to zero.
▪ Step 4. Analyze the change during the year in each noncash account to determine its net increase (decrease) and classify the change
▪ Step 5. Indicate the effect of the change on cash flows by making entries in the Transac-tions columns.
▪ Step 6. After all noncash accounts have been analyzed, enter the net increase (decrease) in cash during the period.
▪ Step 7. Add the Debit and Credit Transactions columns. The totals should be equal.
Preparing the Statement of Cash Flows—The Direct Method
(reports cash flows from operating activities)
▪ Cash Received from Customers
▪ Cash Payments for Merchandise
▪ Cash Payments for Operating Expenses
▪ Gain on Sale of Land
▪ Interest Expense
▪ Cash Payments for Income Taxes