Cash to Accrual

Computation of Gross Sales

Accounts receivable/Notes
receivable*/Advances from customers
Beg AR Beg Advances
Beg NR End AR
End Advances End NR
Gross sales (includingCash received from customers
Recovery of AR Sales discount
Sales returns (excluding refunded returns)
Sales allowance (excluding refunded returns)
Accounts written-off
Recovery AR

*coming from sale of goods or services (excluding amounts lent to other entities)

Computation of Cost of Goods Sold:

Inventory (assuming perpetual)

Beg Invty End Invty
Gross Purchases Cost of Goods Sold (squeeze)
Purchase discount
Purchase return Including refunded
Purchase allowance amounts

Accounts payable/Notes
payable*/Advances to suppliers
Beg Advances Beg AP
End AP Beg NP
End NP End Advances
Purchase discount Gross purchases (squeeze)
Purchase return
Excluding refunded amounts
Purchase allowance
Cash paid to suppliers

*coming from purchase of goods or services (excluding amounts borrowed from other entities
Operating Expenses

Prepaid Expenses/Accrued Expenses

Beg. P.E. Beg. A.E.
End. A.E. End. P.E.
Cash paid for operati Operating Expenses (excluding depreciation and amortization) (squeez

Unrealized Gains and Losses FVTPL Securities

Investment in FVTPL
Beg. Bal End. Bal
Purchase price of addiCarrying amount of sold investment
Unrealized Gain Unrealized Loss

*also applicable to FVTOCI Investment

Cash paid or received from buying or selling Amortized Cost Securities

Investment in AC
Beg. Bal End. Bal
Purchase price of addiCarrying amount of sold investment
Discount Amortizatio Premium Amortization

Computation of gain or loss on sale

PPE (Building, Land, Equipment)

Beg. Bal End. Bal
Purchase price of acquired
Cost of sold PPE

Accumulated Depreciation
End. Bal Beg. Bal Squeeze
Accum Depre related tDepreciation Squeeze
 PPE (Building, Land, Equipment), net of
Accumulated Depreciation*
Beg. Bal End. Bal
Purchase price of acquired
Carrying amout of sold PPE
Depreciation

*Intangible Assets
 Gross Sales (as computed) Pxx
Cash Less: Sales discount (xx)
AR Sales returns (including refun (xx)
Sales allowances (including r (xx)
Cash Net Sales (Accrual Basis) Pxx
Advances
ded returns)

Cash
SD
AR

unts lent to other entities)

Beg Inventory Pxx

Add: Purchases xx
Freight In xx
Less: Purchase discoutns (xx)
Purchase returns (including refund (xx)
Purchase allowances (including re (xx)
Total goods available for sale Pxx
Less: End Inventory (xx)
Cost of Goods Sold Pxx

Increase in balance zero beginning balance; ending balance is equal to the amount of increase
Decrease in balance zero ending balance; beginning balance is equal to the amount of decrease
Advances to suppliers
Cash

Purchases
AP

AP
PD
Cash
amounts borrowed from other entities)
 Expense xx
Accrued Expense xx
depreciation and amortization) (squeeze)
Expense xx
Prepaid Expense xx

Prepaid Expensexx
Cash xx

Accrued Expens xx
Cash xx

Carrying amount of sold investment Pxx

Add: Realized Gain on Sale; or xx
Less: Realized Loss on Sale (xx)
Cash received from selling FVTPL Investment Pxx

Carrying amount of sold investment Pxx

Add: Realized Gain on Sale; or xx
Less: Realized Loss on Sale (xx)
Cash received from selling AC Investment Pxx

Purchase price of acquired Pxx

Less: Non-cash component (liability assumed, exchan (xx) Gain on sale: Proceeds > Carrying amount
Cash paid for the acquired PPE Pxx Loss on sale: Proceeds < Carrying amount

Cost of sold PPE Pxx

Less:Accum Depre related to sold PPE (xx)
Updated carrying amount of sold PPE Pxx Depre. Expxx
Add: Gain on Sale; or xx Accum Depre xx
Less: Loss on Sale (xx)
Cash received from selling PPE Pxx
Accm Depre
Loss on sale (if loss)
PPE (cost)

Cash
Gain on Sale (if gain)
al to the amount of increase
al to the amount of decrease
ds > Carrying amount
ds < Carrying amount
Indirect Method of Computing Cash Flows from Operating Activities
-simpler way of computing the operating cash flows
-in practice, it is followed by virtually every entity

Needed information:
1. beginning and ending balances of current assets and current liabilities.
2. income statement during the period

Net income (in practice, before income tax) Pxx

Add: Losses and expenses recognized not involving operating activities
Loss on sale of PPE xx
Loss on sale and Unrealized losses from FVTOCI or AC investmxx
Depreciation and amortization xx
Impairment Losses xx
Investment in FVTOCI/AC amortization of premium xx
Bond payable amortization of discount xx
Share in net loss of associate xx

Less: Gains and income recognized not involving operating activities

Gain on sale of PPE xx
Gain on sale and Unrealized gains from FVTOCI or AC investmexx
Gain on reversal of impairment Losses xx
Investment in FVTOCI/AC amortization of discount xx
Bond payable amortization of premium xx

Changes in working capital accounts:

Add: Decreases in the carrying amounts noncash trade asset accounts
xx (AR (net of allowance)/NR/Inventory (net of writ
Increases in trade payable accounts (AP/NP/Accrued expenses)
xx

Less: Increases in the carrying amounts noncash trade asset accounts

xx (AR (net of allowance)/NR/Inventory (net of write
Decreases in trade payable accounts (AP/NP/Accrued expenses)
xx
Operating Cash Flows - Indirect Method Pxx
Accrual basis of income

Cash basis of income Pxx

Changes in working capital accounts:
Less: Decreases in the carrying amounts noncashxxtrade asset accounts (AR (net of allowance)/NR/Inventory (net of writ
Increases in trade payable accounts (AP/NP/Accrued
xx expenses)

Add: Increases in the carrying amounts noncash trade

xx asset accounts (AR (net of allowance)/NR/Inventory (net of write
Decreases in trade payable accounts (AP/NP/Accrued
xx expenses)
Accrual of basis of income Pxx
C

Accounts receivable/Notes
receivable*/Advances from customers
500,000 300,000
1,550,000 1,750,000
2,050,000 2,050,000
A

Accounts payable/Notes
payable*/Advances to suppliers
750,000 500,000
4,900,000 5,150,000 Purchases
5,650,000 5,650,000

Beg. Inventory 2,900,000

Add: Purchases 5,150,000
Less: ending Inventory -2,600,000
COGS 5,450,000
D

Cash basis of income 6,000,000

Changes in working capital accounts:
Less: Decreases in the carrying amounts noncash trade asset accounts (AR (net of allowance)/NR/Inventory
Increases in trade payable accounts (AP/NP/Accrued expenses)

Add: Increases in the carrying amounts noncash trade2,000,000

asset accounts (AR (net of allowance)/NR/Inventory (n
Decreases in trade payable accounts (AP/NP/Accrued
1500000
expenses)
Accrual of basis of income 9,500,000
lowance)/NR/Inventory (net of write-down allowance)/Prepaid expenses/FVTPL)
 Accounts receivable/Notes
receivable*/Advances from customers
300,000
100000
Gross Sale 2,420,000

2,820,000

Accounts payable/Notes
payable*/Advances to suppliers
120000
100,000
2,030,000
20,000
2270000
ccounts receivable/Notes
ble*/Advances from customers
250,000 Gross Sales 2,420,000
150,000 Less: Sales discount -40,000
2380000 Sales returns (in -50,000
40,000 Net Sales 2,330,000
2,820,000

Accounts payable/Notes
able*/Advances to suppliers
160,000
150,000
1,960,000 Gross purchases

2270000
D

Prepaid Expenses/Accrued Expenses

23,500 45,000
53,500 18,000
100,000 114,000
177,000 177,000
B

Prepaid Expenses/Accrued Expenses

550,000 800,000
750,000 450,000
3,000,000 3,050,000
4,300,000 4,300,000