1. The CASH FLOW Statement (Statement of changes in financial position) Text Chapter 18, Pages 820-842, 854-857 Practice Questions: 1.BE18-1, BE18-2, BE18-3, E18-1, E18-2 2.BE18-4, Be18-5, BE18-6, E18-3, E18-4, E18-5 3.BE18-11, E18-10, E18-11

3. 18-3- THREE MAJOR STEPS IN PREPARING THE CASH FLOW STATEMENT 18-3- THREE MAJOR STEPS IN PREPARING THE CASH FLOW STATEMENT + or - The difference between the beginning and ending cash balances can be easily calculated from comparative balance sheets. This step involves analysing not only the current year’s income statement but also comparative balance sheets and selected additional data. XYZ Goods This step involves analysing comparative balance sheet data and selected additional information for their effects on cash. For Sale InvestingFinancing Step 1: Determine the net increase (decrease) in cash. Step 2: Determine net cash provided (used) by operating activities. Step 3: Determine net cash provided (used) by investing and financing activities.

4. What is a Statement of Changes in Financial Position ? The statement of changes in financial position (SCFP) is an operating statement - like the income statement. That is, it portrays activities that have occurred during a designated financial period. A SCFP summarizes the operating, financing and investing activities of a business for a period on a cash basis and cash equivalents. It explains how the cash position of a company has changed over the period. A SCFP focuses only on transactions that occur with cash or cash equivalents; this differs from what you are used to in financial accounting which is accrual based. Common accrual accounting transactions such A/P, A/R, recognized revenue that has not been collected are not cash transactions.

5. OPERATING ACTIVITIES: The most important part! begin with the NI from continuing operations on the income statement add or subtract changes from the current non-cash accounts on the balance sheet (A/P, A/R, inventories, prepaid and accrued expenses (use year over year) add back non-cash items from the income statement such as depreciation and amortization

6. NET INCOME TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (B/S: Noncash Current Assets and Current Liabilities) Adjustments to Convert Net Income to Net Cash Provided (Used) by Operating Activities Add*Deduct* Change in Current Asset Account Balance Accounts receivable Decrease Increase Inventory Decrease Increase Prepaid expenses Decrease Increase Other current assets Decrease Increase Change in Current Liability Account Balance Accounts payable Increase Decrease Accrued expenses payable Increase Decrease Other current liabilities Increase Decrease * Add (deduct) change in account balance to net income

7. NET INCOME TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (I/S: Noncash Items) Adjustments to Convert Net Income to Net Cash Provided (Used) by Operating Activities Noncash Items on Income Statement Amortization (of capital assets) expenseAdd Amortization of bond discount to interest expenseAdd Amortization of bond premium to interest expense Deduct Loss on sale of assetAdd Gain on sale of asset Deduct Income from long-term equity investment Deduct

8. Computer Services Corp Ill. 18-4 p. 829 Balance Sheet ASSETS 31-Dec-02 01-Jan-02 CHANGEIn/decrease Cash340000 AR300000 Inventory250000 Equipment100000 TOTAL990000 LIABILITIES & OE AP150000 accrued expenses payable40000 Common shares600000 Retained earnings200000 TOTAL990000

9. Computer Services Corp Ill. 18-4 p. 829 Balance Sheet ASSETS 31-Dec-0201-Jan-02CHANGEIn/decrease Cash340000 + AR300000 + Inventory250000 + Equipment100000 + TOTAL990000 LIABILITIES & OE AP150000 + accruedaccrued expenses payable40000 + Common shares600000 + Retained earnings200000 + TOTAL990000

10. SCFP go to excel spread sheet!

11. Computer Services Corp Ill. 18-9 p. 835 Balance Sheet, December 31 ASSETS20032002CHANGEIn/decrease Cash56,00034,000 AR20,00030,000 Inventory75,00025,000 Prepaid expenses4,0000 Land130,0000 Buildings160,0000 Accum. Amort. Build-11,0000 Equipment27,00010,000 Accum. Amort. Equip-3,0000 TOTAL458,00099,000 LIABILITIES & OE AP115,00015,000 accrued expenses payable9,0004,000 Bonds Payable130,000 Common shares60,000 Retained earnings144,00020,000 TOTAL458,00099,000

12. Computer Services Corp Ill. 18-9 p. 835 Balance Sheet, December 31 ASSETS20032002CHANGEIn/decrease Cash56,00034,00022,000+ AR20,00030,000-10,000- Inventory75,00025,00050,000+ Prepaid expenses4,0000 + Land130,0000 + Buildings160,0000 + Accum. Amort. Build-11,0000 - Equipment27,00010,00017,000+ Accum. Amort. Equip-3,0000 - TOTAL458,00099,000 LIABILITIES & OE AP115,00015,000100,000+ accrued expenses payable9,0004,0005,000+ Bonds Payable130,000 + Common shares60,000 0 Retained earnings144,00020,000124,000+ TOTAL458,00099,000

13. SCFP go to excel spread sheet!