Instructions for a Cash Flows Statement-Direct Method

Love Thy Pets Inc,. Statement of Cash Flows For the Year Ended, December 31, 2011 Cash flows from operating activities: Cash receipts from operating activities $XX,XXX Cash payments from operating activities (XX,XXX) Net cash provided by operating activities Cash flows from investing activities: Purchase of equipment Sale of equipment Purchase of investment Sale of investment Net cash used by investing activities Cash flows from financing activities: Issuance of common stock Issuance of note or bonds payable Payment of dividends Redemption of bonds Purchase of treasury stock Net cash provided by financing activities Net increase (decrease) in cash Cash at beginning of period Cash at end of period

$XX,XXX

(XX,XXX) XX,XXX (X,XXX) X,XXX XX,XXX

XX,XXX XX,XXX (X,XXX) (X,XXX) (X,XXX) XX,XXX X,XXX XX,XXX $XX,XXX

MJC Revised 10-2011

Page 1

Instructions for a Cash Flows Statement-Direct Method
Contents
Operating section of cash flows statement: ................................................................................ 3 Investing section of the cash flows statement: ............................................................................ 4 Financing section of the cash flows statement:........................................................................... 5 End section of the cash flows statement: .................................................................................... 5

For a presentation on the topic of “Cash Flows Statement-Direct Method” go to this web-link: http://prezi.com/vopd12nirah2/cash-flows-statement-direct-method/

MJC Revised 10-2011

Page 2

Instructions for a Cash Flows Statement-Direct 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. The first line of the body of the statement contains in the left column the section header “Cash flows from operating activities.” 2. Next, place the title “Cash receipts from operating activities” in the left column. The dollar amount, which is placed in the middle column, will include all of the cash receipts from customers during the fiscal period. The formula: a. Cash receipts from customers = Revenues from either Sales or Services Plus decreases in accounts receivable Minus increases in accounts receivable

3. Now, place the title “Cash payments for operating activities” on the next line. This dollar amount will include all cash payment made over the fiscal period. There are a number of formulas used to calculate this dollar amount. Add the results from these formulas to provide a dollar amount for the statement. This amount will have brackets because the amount decreases cash flow from operating activities. The Formulas: a. Cash Payments to Supplies = Cost of Goods Sold Plus increase in inventory decrease in accounts payable Minus decrease in inventory increase in accounts payable

b. Cash payments for operating expenses = Operating expenses Plus Minus increase in prepaid expenses decreases in prepaid expenses decreases in accrued expenses payable increases in accrued expenses payable Any depreciation, amortization, or depletion that was included in the operating expenses.

MJC Revised 10-2011

Page 3

Instructions for a Cash Flows Statement-Direct Method

c. Cash payments for interest = Interest expense Plus decrease in interest payable Minus increase in interest payable

d. Cash payments for income taxes = Income tax expense Plus decreases in income taxes payable Minus increases in income taxes payable

4. On the last line of this section, place the title “Net cash provided by operating activities.” Subtract cash payments from operating activities from cash receipts from operating activities and place the results in the right column.

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.

MJC Revised 10-2011

Page 4

Instructions for a Cash Flows Statement-Direct Method
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. 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 10-2011

Page 5

Sign up to vote on this title
UsefulNot useful