Alternating Accounts: ADJUSTMENTS FOR Unrecorded Accounts:

only 1 account follows their normal balance upon adj. entry DIRECT METHOD all accounts follow their normal balance
upon adj. entry

Expense-Asset Income-Liability types: Expense-Liability Income-asset

(dr) (cr) (dr,cr) (cr,dr)

Ending Balance of asset/liability Add to expense/income: Beginning Balance of asset/liability

Increase in asset/liability Decrease in liability/asset

Beginning Balance of asset/liability Deduct to expense/income Ending Balance of asset/liability

Decrease in asset/liability Increase in liability/asset

Expense(decr in cash) and Income accounts(incr in cash) are adjusted to get amts entered in Cash acct

2 SCF METHODS

Direct Method Indirect Method

ADJUST THESE 6 to get CASH BALANCE “Profit before interest expense and income tax expense” is ADJUSTED to get
“Sales Revenue”, “Other Income”, Cash Balance
Adjust CGS to get “Purchases” : add invntry end, deduct invntry beg
“Operating Expense”, “Interest Expense”, “Income Tax Expense”

Relationship between Alternating Accounts 5 What should be added back?
Relationship between Accrued/Unrecorded Accounts >Depreciation
(refer to table above) >Amortization of
Patent/Lease/Intangibles
>Loss on Sale of Assets
>Decrease in Current Assets, beg.
bal Unrecorded Income-Asset
>Increase in Current Liabilities, end.
bal Alternating Income-Liab
3 What should be deducted?
>Gain on Sale of Assets
>Increase in Current Assets, end bal.
Unrecorded/Accrual Income-Asset
>Decrease in Current Liabilities, beg.
bal Alternating Income-liab

Interest Expense paid in Cash DEDUCT

Income Tax Expense paid in Cash DEDUCT
Transactions (General Presentation)
Operating Activities
5 5
Cash Receipts from Sale of Goods and Rendering of
Services
Cash Receipts from royalties, fees, commissions and
other revenue
Cash Receipts of an insurance enterprise for premiums
and claims, annuities and other policy benefits
Cash Refunds of income taxes unless they can be
specifically identified with financing and investing
activities
Cash Receipts from contracts held for dealing or trading
purposes
Cash Receipts from equity instruments and associate
Investing Activities Financing Activities
Cash proceeds from issuing shares or other equity
instruments;
Cash receipts from sales of property, plant and
equipment, intangibles and other long term assets
Cash receipts from sales of investments in equity or debt
instruments of other enterprises and
interests in joint ventures.
Cash advances and loans made to other parties (other
than advances and loans made by a
financial institution)
Cash receipts from the repayment of advances and loans
to other parties (other than advances
and loans of a financial institution)
Cash receipts from future contracts, forward contracts,
option contracts and swap contracts
except when the contracts are held for dealing or trading
purposes, or the receipts are
classified as financing activities.
6 3
Cash payment for current assets
Cash payments to suppliers for goods or services
Cash payments to and on behalf of employers
Cash payments of an insurance enterprise for premiums
and claims, annuities and other policy benefits
Cash payments from contracts held for dealing or
trading purposes
Cash Payments of income taxes unless they can be
specifically identified with financing and investing
activities
Alternative Presentations
Dividends Received, Investing Activities
Payment of Dividends, Operating Activities
Interest Income, Investing Activities
Interest Expense, Financing Activities
Cash payments to acquire property, plant and equipment,
intangibles and other long term assets
Cash payments to acquire investments in equity or debt
instruments of other enterprises and interests in joint
ventures.
Cash payments for future contracts, forward contracts,
option contracts and swap contract
except when the contracts are held for dealing or trading
purposes, or the payments are
classified as financing activities.
5
Cash payments to owners to acquire or redeem the
enterprise’s shares;
Cash payments from issuing debentures, loans, notes,
bonds, mortgages and other short or
long-term borrowings;
Cash repayments of amounts borrowed; and
Cash payments by a lessee for the reduction of the
outstanding liability relating to a lease.
Cash payments from dividends