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Instructions for a Cash Flows Statement-Indirect Method

Love Thy Pets Inc,.


Statement of Cash Flows
For the Year Ended, December 31, 2011
Cash flows from operating activities:
Net Income
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation
$XX,XXX
Amortization
XX,XXX
Loss on disposal of store equipment
XX,XXX
Gain on disposal of office equipment
(XX,XXX)
Increase in accounts receivable
(X,XXX)
Decrease in merchandise inventory
XXX
Increase in prepaid expenses
(X,XXX)
Decrease in accounts payable
(XX,XXX)
Increase in accrued expenses payable
X,XXX
Net cash provided by operating activities
Cash flows from investing activities:
Purchase of equipment
(XX,XXX)
Sale of equipment
XX,XXX
Purchase of investment
(X,XXX)
Sale of investment
X,XXX
Net cash used by investing activities
Cash flows from financing activities:
Issuance of common stock
XX,XXX
Issuance of note or bonds payable
XX,XXX
Payment of dividends
(X,XXX)
Redemption of bonds
(X,XXX)
Purchase of treasury stock
(X,XXX)
Net cash provided by financing activities
Net increase (decrease) in cash
Cash at beginning of period
Cash at end of period

MJC Revised 5-2015

$XX,XXX

X,XXX
XX,XXX

XX,XXX

XX,XXX
X,XXX
XX,XXX
$XX,XXX

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Instructions for a Cash Flows Statement-Indirect Method


Contents
Operating section of cash flows statement: ................................................................................ 3
Investing section of the cash flows statement: ............................................................................ 4
Financing section of the cash flows statement:........................................................................... 4
End section of the cash flows statement: .................................................................................... 5

MJC Revised 5-2015

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Instructions for a Cash Flows Statement-Indirect Method


Step-by-Step Instructions
Start with the three-line header, which included the name of the corporation, the title of the
statement, and the period for which the statement is being prepared.

Operating section of cash flows statement:


1. On the first line of the body of the statement in the far left hand column, place the title
Cash flows from operating activities. Note: this is a heading and no dollar amount is
placed in the columns to the right.
2. Next place Net income which you will get from the bottom of your income statement.
Place the amount in the right hand column.
3. The next line is a titled, Adjustments to reconcile net income to net cash provided by
operating activities. Note: this is a heading and no dollar amount is placed in the column
to the right.
4. Always start by listing any depreciation, amortization, gains or losses on disposal. These
items come from the income statement .
Add
Depreciation
Amortization
Losses on Disposal of Plant,
Property, or Equipment

Subtract
Gains of Sale of Plant, Property, or Equipment

The total proceeds (cash received for the sale of assets) from the sale of assets will be
recorded in the investing section of the cash flow statement. The amounts for
depreciation, amortization and losses/gains on disposal are placed in the middle
column. Remember if the depreciation is included in a larger item on the income
statement it can be deduced by creating a t-account. Take from the balance sheet the
beginning balance of accumulated depreciation subtract any accumulated depreciation
for the disposal of an asset and then subtract that amount from the ending balance to
get the amount of depreciation for the current year.
5. Next on the list is current assets, these items can either increase or decrease in amount
over the year. Current assets are: Accounts receivable, Merchandise inventory, and
prepaid expenses. Cash is not included in this list because it will be used at the end of
the statement. The amounts are placed in the middle column.

MJC Revised 5-2015

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Instructions for a Cash Flows Statement-Indirect Method


6. Next on the list is current liabilities, again these items can either increase or decrease in
amount over the year. Current liabilities are: account payable, income tax payable,
interest payable and any other payable account that is listed as a current liability. The
amounts are placed in the middle column.

Current Assets
Current Liabilities

Increases
Subtract
Add

Decreases
Add
Subtract

7. Total up all of the pluses and minuses values and place the total on the same line as the
last liability with the amount in the far right hand column.
8. Depending on where the amount is positive or negative either add or subtract the total
from the net income to get Net cash provided by operating activities.

Investing section of the cash flows statement:


1. This section starts with the section header Cash flows from investing activities placed
in the left column.
2. On the next few lines place the titles for any of these events which occurred during the
fiscal period:
Plus
Sale of equipment
Sale of investment

Minus
Purchase of equipment
Purchase of investment

Place the dollar amounts in the middle column. Any items in the minus column of the
above chart will have brackets surrounding their dollar amounts.
3. Finally, for this section total the entire sales minus all of the purchases to get the results
of this section. Place the title Net cash provided by investing activities if the result is
positive or if the result is negative use the title Net cash used by investing activities.
The resulting dollar amount is place in the right column.

Financing section of the cash flows statement:


1. Start this section with the header Cash flows from financing activities in the left
column.
2. Place any of these item titles in this section if the events occurred during the fiscal period.

MJC Revised 5-2015

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Instructions for a Cash Flows Statement-Indirect Method


Plus
Sale of stock
Sale of bonds or notes

Minus
Purchase of Treasury Stock
Redemption of bonds or notes
Payment of dividends

3. Finally, for this section total all of the sales minus all of the purchases, redemptions, and
payments to get the results of this section. Use the title Net cash provided by financing
activities if the result is positive or if the result is negative use the title Net cash used by
financing activities. Place the title in the left column. The resulting dollar amount is
place in the right column.

End section of the cash flows statement:


1. Start this section by placing the title Net increase (decrease) in cash in the left column.
Total the results from the right column, which includes dollar amounts from operating
activities, investing activities and financing activities.
2. Now place the title Cash at the beginning of the period in the left column. This dollar
amount comes from the balance sheet at the end of the prior year.
3. Finally, either add (positive dollar amount) or subtract (negative amount) from the
beginning of the period cash to get cash at end for the period. Place the title Cash at end
of period in the left column.

MJC Revised 5-2015

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