DIRECT METHOD - OCF:

1/ Sales - AR - Cash Aim? To find Cash receipts from sales/AR:

SALES AR
opening b/l (SFP)

A (IS) A X1

Ending b/l (SFP)

X1 = opening AR + A - Ending AR = A - (ending -opening)AR = A - change

2/ Cash - AP - Merchadise Inventory - COGS To find cash payment for purchasing Inventory through

Cash AP/TP
opening b/l

X2? X2 B

ending b/l
X2 = Opening bl AP + B - Ending bl AP

3/ Cash - Prepaid Ex/ Other payables - Operating ex: To find cash payment for operating ex

Cash Prepaid ex/Other Payables

X3 X3 A

X3 (prepaid ex) =Ending bl Prepaid ex + Operating ex - Opening bl Prepaid ex

X3 (other payables) = Opening Payables + Operating ex - Ending bl payables

4/ Cash - Interest payables - Interest expenses:

X4 = Opening Interest Payables + Interest ex - End
 Cash Interest payables

X4

5/ Cash - Tax payables - Tax expenses: X5 = Opening Tax payables + Tax ex - Ending tax payables

Cash Tax payables

X5
 CASH
Cash receipts form sales

X1

- (ending -opening)AR = A - changes of AR

Dr Inv/Cr AP Dr AR/Sales Dr COGS/Cr MI
urchasing Inventory through AP and COGS

MI/Purchases COGS
opening b/l

B C C (IS)

ending b/l

B= Ending b/l MI + C - Opening b.l MI

Operating ex

A (IS)

ng ex - Opening bl Prepaid ex
ating ex - Ending bl payables

nterest Payables + Interest ex - Ending bl Interest Payables

 Interest expenses/finance costs

B (IS)

- Ending tax payables

Tax expenses
DIRECT METHOD - OCF:

1/ Sales - AR - Cash
SALES AR CASH

2/ Cash - AP - Merchadise Inventory - COGS

Cash AP MI

3/ Cash - Prepaid Ex/ Other payables - Operating ex:

Cash Prepaid ex/Other Payables Operating ex

4/ Cash - Interest payables - Interest expenses:

 Cash Interest payables Interest expenses

5/ Cash - Tax payables - Tax expenses:

Cash Tax payables Tax expenses

 CASH

MI COGS

Operating ex
Interest expenses

Tax expenses
STEP 2: INDIRECT METHOD:

Net income 38,000 Net OCF 1/ Dr Depreciation ex

Adjust: Cr Accummulated depreciation
1/ Non-cash items: 2/ Dr Irrecoverable bad debts ex
Depreciation ex 24,000 Cr TR
2/ Non-operating items: 3/ Dr inventory loss
Gain on retirement of bonds - 16,000 Cr COS/COGS
Loss on sales of NCA 6,000
3/ Changes of CA and CL:
Changes in TR/AR - 20,000
Changes in Inventory - 14,000
Changes in prepayments - 2,000
Changes in AP - 5,000
Changes in Interest payables - 1,000
Changes in tax payables 10,000
Net OCF 20,000
reciation ex
ccummulated depreciation
coverable bad debts ex
DIRECT METHOD - OCF:

1/ Sales - AR - Cash Aim? To find Cash receipts from sales/AR: 570,000

SALES AR
40,000

590,000 590,000 X1
SCI/Income statement
60,000
X1 = opening AR + A - Ending AR = A - (ending -opening)AR = A

2/ Cash - AP - Merchadise Inventory - COGS To find cash payment for purchasing Inventory t

Cash AP/TP
40,000

X2? X2 B
319,000 319,000 314,000
35,000
X2 = Opening bl AP + B - Ending bl AP

3/ Cash - Prepaid Ex/ Other payables - Operating ex: To find cash payment for operating ex

Cash Prepaid ex
4,000

X3 X3 A
218,000 218,000 216,000
6,000
X3 (prepaid ex) =Ending bl Prepaid ex + Operating ex - Opening bl Prepaid e
X3 (other payables) = Opening Payables + Operating ex - Ending bl payable

4/ Cash - Interest payables - Interest expenses: 8,000

X4 = Opening Interest Payables + Interest
 Cash Interest payables
4,000
7,000
X4 X4
8,000 8,000
3,000

5/ Cash - Tax payables - Tax expenses: X5 = Opening Tax payables + Tax ex - Ending tax payables

Cash Tax payables

12,000

X5 X5 15,000
5,000 5,000
22,000

Present: DIRECT METHOD TO FIND OCF:

Cash receipts from sales/AR:
Cash payment for purchasing Inventory through AP and COGS
Cash payment for operating ex
Cash payment for interest
Cash payment for tax
Net OCF
 CASH
Cash receipts form sales

X1
570,000

A - (ending -opening)AR = A - changes of AR

Dr Inv/Cr AP Dr AR/Sales Dr COGS/Cr MI
urchasing Inventory through AP and COGS 319,000

MI/Purchases COGS
70,000

B 300,000 300,000
314,000
84,000

B= Ending b/l MI + C - Opening b.l MI

218,000

Operating ex

216,000

ng ex - Opening bl Prepaid ex
ating ex - Ending bl payables

Interest Payables + Interest ex - Ending bl Interest Payables

 Interest expenses/finance costs

7,000

- Ending tax payables 5,000

Tax expenses

15,000

570,000
- 319,000
- 218,000
- 8,000
- 5,000
20,000
ICF:
Step 2:
Journalize entries: Present: ICF:
Note 2: Dr Plant assets 70,000 Cash receipts from sale of NCA
Cr Cash 10,000 Cash payments for purchasing NCA
Cr Bonds payables 60,000 Net ICF
Note 3: Dr Cash 12,000
Dr Accum depre 12,000
Dr Loss on sales PPE/NCA 6,000 Attaching notes for non-cash investing a
Cr Plant assets 30,000 Investing plant assets by issuing bonds

FCF:
Step 2:
Journalize entries:
Note 5: Retire bonds: Present FCF:
Dr Bond payables 34,000 Cash receitps from issuing shares
Cr Cash 18,000 Cash payments from retiring bonds
Cr Gain on retiring bonds 16,000 Cash payments from paying dividends
Note 4: Issue shares: Net FCF
Dr Cash 15,000
Cr Share capital/Common stock 15,000
Note 6: Declared and paid dividends:
a/Dr RE 14,000
Cr Dividends payables 14,000
b/ Dr Dividends payables 14,000
Cr Cash 14,000
 pts from sale of NCA 12,000
ments for purchasing NCA - 10,000
2,000

notes for non-cash investing activities:

plant assets by issuing bonds 60,000

tps from issuing shares 15,000

ments from retiring bonds - 18,000
ments from paying dividends - 14,000
- 17,000
 CFS indirect: CFS Direct method:
Net income 38,000 Present: DIRECT METHOD TO FIND OCF:
Adjust: Cash receipts from sales/AR:
1/ Non-cash items: Cash payment for purchasing Inventory through AP a
Depreciation ex 24,000 Cash payment for operating ex
2/ Non-operating items: Cash payment for interest
Gain on retirement of bonds - 16,000 Cash payment for tax
Loss on sales of NCA 6,000 Net OCF
3/ Changes of CA and CL:
Changes in TR/AR - 20,000 ICF:
Changes in Inventory - 14,000 Cash receipts from sale of NCA
Changes in prepayments - 2,000 Cash payments for purchasing NCA
Changes in AP - 5,000 Net ICF
Changes in Interest payables - 1,000
Changes in tax payables 10,000 Present FCF:
Net OCF 20,000 Cash receitps from issuing shares
Cash payments from retiring bonds
ICF: Cash payments from paying dividends
Cash receipts from sale of NCA 12,000 Net FCF
Cash payments for purchasing NCA - 10,000 Total cash movements
Net ICF 2,000 Cash and cash equivalents, opening
Cash and cash equivalents, ending
Present FCF:
Cash receitps from issuing shares 15,000
Cash payments from retiring bonds - 18,000 Attaching notes for non-cash investing activities:
Cash payments from paying dividends - 14,000 Investing plant assets by issuing bonds
Net FCF - 17,000
Total cash movements 5,000
Cash and cash equivalents, opening 12,000
Cash and cash equivalents, ending 17,000

Attaching notes for non-cash investing activities:

Investing plant assets by issuing bonds 60,000
 ETHOD TO FIND OCF:
570,000
rchasing Inventory through AP and COGS - 319,000
- 218,000
- 8,000
- 5,000
20,000

ale of NCA 12,000

purchasing NCA - 10,000
2,000

ssuing shares 15,000

m retiring bonds - 18,000
m paying dividends - 14,000
- 17,000
5,000
valents, opening 12,000
valents, ending 17,000

non-cash investing activities:

ts by issuing bonds 60,000