Professional Documents
Culture Documents
Operating Activities
Transactions that generally involve producing and delivering goods and providing services Inflows selling goods and services, interest and dividend revenue Outflows inventory, salary exp, interest exp
Investing Activities
Buying and selling plant assets and securities, and making loans and collecting on them Inflows sale of plant assets and investment securities, collecting loans Outflows purchasing plant assets, investment securities
Financing Activities
Obtaining resources from owners and providing return, and obtaining resources from creditors and repaying principal Inflows issuing stock, bonds, other short and long-term borrowing Outflows purchasing treasury stock, repaying principal, cash dividends
10
11
12
13
Direct Method
Goal to convert each income statement item from accrual to cash basis First, identify the balance sheet account(s) that relate to each income statement item Next, combine the change in the balance sheet account with the income statement amount
14
15
Take sales amount and Add decrease in accounts receivable OR Subtract increase in accounts receivable
16
17
18
19
To calculate cash payments to suppliers, take purchases amount and Add decrease in accounts payable OR Subtract increase in accounts payable
20
Cash payments for expenses relate the expense to a change in an accrued expense account or a prepaid expense Cash payments for wages relates wages expense and change in wages payable Cash payments for office supplies relates office supplies expense and changes in office supplies
21
To calculate cash payments for expenses, take the expense amount and Add decrease in accrued expense
OR
22
Cash receipts for revenues relate the revenue to a change in an unearned revenue account or accrued revenue Cash receipts from interest relates interest revenue and change in interest receivable Cash receipts from subscriptions relates subscriptions revenue and changes in unearned subscriptions
23
To calculate cash receipts from revenues, take the revenue amount and Add decrease in accrued revenue
OR
24
25
26
27
28
Analyze changes in nonoperating current liabilities, noncurrent liabilities, paid-in capital, and nonoperating changes to retained earnings(dividends) If bonds increased, there was an issuance of bonds If paid-in capital increased, there was an issuance of stock
29
30
31
32
33
34