งบกระแสเงินสด(Statement of Cash Flows) Chapter 12 2

Purpose of the Statement of Cash Flows Provides information about the cash receipts and cash payments of a business entity during the accounting period. Helps investors with questions about the company’s: Ability to generate positive cash flows. Ability to meet its obligations and to pay dividends. Need for external financing. Investing and financing transactions for the period.

Classification of Cash Flows The Statement of Cash Flows must include the following three sections: Cash Flows from Operating Activities Cash Flows from Investing Activities Cash Flows from Financing Activities

Cash Flows from Operating Activities Inflows from: Sales to customers. Interest and dividends received. + _ Cash Flows from Operating Activities Outflows to: Suppliers of merchandise and services. Employees. Lenders for interest. Governments for taxes.

Cash Flows from Investing Activities Inflows from: Selling investments and plant assets. Collecting principal on loans. + _ Cash Flows from Investing Activities Outflows to: Payments to acquire investments & plant assets. Purchase debt or equity investments. Make loans.

Cash Flows from Financing Activities Inflows from: Short-term and long-term borrowing. Owners (for example, from issuing stock). + _ Cash Flows from Financing Activities Outflows to: Repayments of borrowed funds. Owners for dividends. Purchase treasury stock.

The operating cash flows section can be prepared using either the direct method or the indirect method.

Now that we understand the process, let’s look at some simplified formulas for computing direct method cash flows.

Direct Method Cash Received from Customers Accrual basis revenue includes sales that did not result in cash inflows. Can be computed as: Decrease in receivables + = Cash Received from Customers Net Sales Increase in receivables – =

Direct Method Cash Received from Customers The A/R balance was $80,000 on 12/31/20x1 and $110,000 on 12/31/20x2. If accrual sales revenue for 20x2 was $900,000, what was cash basis revenue? Decrease in receivables + = Net Sales $900,000 Cash Received from Customers Increase in receivables – =

Direct Method Cash Received from Customers The A/R balance was $80,000 on 12/31/20x1 and $110,000 on 12/31/20x2. If accrual sales revenue for 20x2 was $900,000, what was cash basis revenue? Decrease in receivables Net Sales $900,000 Cash Received from Customers = $870,000 $30,000 Increase in receivables – =

Direct Method Cash Paid for Merchandise Step 1 Step 2

Direct Method Cash Paid for Merchandise How much did Lug Lite pay for inventory in 20x1? Purchases for 2003 were $935,000. Purchases = $900,000 + $35,000 Cash Paid for Merchandise in 2003 was $923,000. Cash Paid = $935,000 - $12,000

Direct Method - Example Cash Flows From Operating Activities

Let’s prepare a complete Statement of Cash Flows using the Indirect Method.

Reporting Operating Cash Flows by the Indirect Method Changes in current assets and current liabilities as shown on the following table. Cash Flows from Operating Activities Net Income + Losses and - Gains + Noncash expenses such as depreciation and amortization.

Reporting Operating Cash Flows by the Indirect Method Use this table to determine the effect of changes in current assets and liabilities on Operating Cash Flows.

Indirect Method - Example Joe’s Place has prepared the Balance Sheet as of March 31, 20x2, and March 31, 20x1. The Income Statement for the year ended 3/31/x2 has also been prepared. Joe needs help preparing the Statement of Cash Flows. Joe’s Place

Indirect Method - Example With the indirect method, always start with the net income or net loss for the period.

Indirect Method - Example

Indirect Method - Example Add back non-cash expenses.

Indirect Method - Example The $8,000 gain was the result of selling land costing $32,000 for $40,000 during the period.

Indirect Method - Example Subtract gains.

Indirect Method - Example The operating cash flows amount comes from the schedule just prepared.

Indirect Method - Example Land originally costing $32,000 was sold for $40,000.

Indirect Method - Example Dividends of $20,000 were paid to owners during the year.

Indirect Method - Example Compute the net change in cash for the period.

Indirect Method - Example Complete the Statement of Cash Flows by reconciling beginning cash to ending cash.

Indirect Method - Example Note that the ending cash amount ties back to the Joe’s Place Balance Sheet at 3/31/20x2.

End of Chapter 12 Chester, ol’ buddy, I wonder if you could help me with a little cash flow problem I’m having?