YE SUN AccountingEnglish 8
Company Name Statement of Cash Flows Period Covered Cash flows from operating activities: [List of individual inflows and outflows] Net cash provided (used) by operating activities
Direct Method Cash Paid for Merchandise
How much did Lug Lite pay for inventory in 1999?
Inventory, 1/1/99 Inventory, 12/31/99 COGS, 12/31/99 $ 130,000 $ 165,000 $ 900,000 A/P, 1/1/99 A/P, 12/31/99 $ 23,000 $ 35,000
_
Cash Flows from Financing Activities
7
YE SUN AccountingEnglish
Cash and Cash Equivalents
Cash Equivalents
Cash
Currency



Short-term, highly liquid investments. Readily convertible into cash. So near maturity that market value is unaffected by interest rate changes.
Acquire plant assets. Purchase debt or equity investments. Make loans.
_
Cash Flows from Investing Activities
YE SUN AccountingEnglish
6
Financing Activities
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Company Name Statement of Cash Flows Period Covered Cash flows from operating activities: [List of individual inflows and outflows] Net cash provided (used) by operating activities Cash flows from investing activities: [List of individual inflows and outflows] Net cash provided (used) by investing activities Cash flows from financing activities: [List of individual inflows and outflows] Net cash provided (used) by financing activities Net increase (decrease) in Cash
Dividends Dividends = Received Revenue
{
+ Decrease in dividends receivable - Increase in dividends receivable
15
YE SUN AccountingEnglish
Direct Method Cash Paid for Merchandise Step 1
$ #####
Cash flows from investing activities: The operating cash flows [List of individual inflows and outflows] section can be prepared either the direct Net cash provided (used) byusing investing activities ##### Cash flows from SUN AccountingEnglish [List of individual inflowsYEand outflows]
$ #####
#####
##### $ #####
Cash (and equivalents) balance at beginning of period ##### Cash (and equivalents) balance at end of period $ #####
YE SUN AccountingEnglish 3
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
+
Revenue, Accrual basis $800,000
Decrease in receivables
=
Revenue, Cash basis
–
Increase in receivables
=
12
YE SUN AccountingEnglish
Direct Method Cash Received from Customers The A/R balance was $40,000 on 1/1/99 and $52,000 on 12/31/99. If accrual sales revenue for 1999 was $800,000, what was cash basis revenue?
YE SUN AccountingEnglish 14
Direct Method Interest and Dividends Received
Interest Received Interest = Revenue
{
+ Decrease in interest receivable - Increase in interest receivable
+
Revenue, Accrual basis$800,000
Decrease in receivables
=
Revenue, Cash basis $788,000
–
$12,000 Increase in receivables
=
13
YE SUN AccountingEnglish
Now that we understand the process, let’s look at some simplified formulas for computing direct method cash flows.

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.
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
=
Revenue, Cash basis
Revenue, Accrual basis
–
பைடு நூலகம்
Increase in receivables
=
11
YE SUN AccountingEnglish
Direct Method Cash Received from Customers The A/R balance was $40,000 on 1/1/99 and $52,000 on 12/31/99. If accrual sales revenue for 1999 was $800,000, what was cash basis revenue?
YE SUN AccountingEnglish
4
Operating Activities
Inflows from:

Sales to customers. Interest and dividends received.
Outflows to:



Suppliers of merchandise and services. Employees. Lenders for interest. Governments for taxes.
method or the indirect financing activities: method.
9
Let’s look at the Direct Method for preparing the Statement of Cash Flows.
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YE SUN AccountingEnglish 5
Investing Activities