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Cash Flow Statement Lec 01

The document outlines the preparation of a cash flow statement using the indirect method, highlighting the sources of information needed, including comparative balance sheets and the current income statement. It classifies cash flows into operating, investing, and financing activities, detailing the nature of each category. Additionally, it emphasizes the adjustments required to convert net income to net cash provided by operating activities.

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29 views6 pages

Cash Flow Statement Lec 01

The document outlines the preparation of a cash flow statement using the indirect method, highlighting the sources of information needed, including comparative balance sheets and the current income statement. It classifies cash flows into operating, investing, and financing activities, detailing the nature of each category. Additionally, it emphasizes the adjustments required to convert net income to net cash provided by operating activities.

Uploaded by

kashifkhanak607
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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LECTURE 1

Cash Flow Statement


PREPARE A STATEMENT OF CASH FLOWS USING THE
INDIRECT METHOD
• The information to prepare this statement usually comes from three sources:
• Comparative balance sheets. Information in the comparative balance sheets
indicates the amount of the changes in assets, liabilities, and stockholders’ equities
from the beginning to the end of the period.
• Current income statement. Information in this statement helps determine the
amount of net cash provided or used by operating activities during the period.
• Additional information. Such information includes transaction data that are
needed to determine how cash was provided or used during the period.
CLASSIFICATION OF CASH FLOWS

The statement of cash flows classifies cash receipts and cash payments as
1. Operating activities include the cash effects of transactions that create revenues
and expenses. They thus enter into the determination of net income.
2. Investing activities include (a) acquiring and disposing of investments and
property, plant, and equipment, and (b) lending money and collecting the loans.
3. Financing activities include (a) obtaining cash from issuing debt and repaying
the amounts borrowed, and (b) obtaining cash from stockholders, repurchasing
shares, and paying dividends.
ADJUSTMENTS TO CONVERT NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
SUMMARY OF CONVERSION TO NET CASH PROVIDED BY
OPERATING ACTIVITIES—INDIRECT METHOD

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