ACCT 2102 1st Edition Lecture 34 Outline of Last Lecture I Comprehension Quiz Outline of Current Lecture II Statement of Cash Flows III Organizing the Statement IV Preparing the Statement V Direct Method of Preparing the Operating Section Current Lecture Statement of Cash Flows Chapter 13 II What is the Statement of Cash Flows One of the four basic financial statements Shows how the company generated and used cash during the period Reports the overall increase or decrease in cash Company Name Statement of Cash Flows For the period ended xxx Cash provided or used by operating activities Cash provided or used by investing activities Cash provided or used by financing activities Net increase or decrease in cash Beginning Cash Ending Cash III Organizing the Statement Operating Section Prepared using either the direct or the indirect method Reports transactions that affect net income current assets and current liabilities Investing Section Reports transactions that affect long term assets These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute IV Sources of cash sell property plant or equipment sell stock of other companies receipt of money loaned to other companies Uses of cash purchase property plant or equipment purchase stock of other companies loan money to other companies Financing Section Reports transactions that affect long term liabilities and stockholders equity Sources of cash sell company stock issue long term debt Uses of cash purchase treasury stock pay dividends repay long term debt Preparing the Statement To prepare the Statement of Cash Flows you need The Income Statement for the current period or select data from the Income Statement A comparative Balance Sheet or changes in Balance Sheet accounts Miscellaneous information related to investing and financing transactions The Operating Section is prepared using The indirect method start with Net Income and reconcile back to a cash basis The direct method calculate Income Statement items using the cash basis V Let s take a closer look at the direct method of preparing the Operating Section Typical transactions reported in the section include Cash receipts from customers Analyze Sales Revenue from Income Statement and Accounts Receivable from Balance Sheet Beg A R Sales Revenue Ending A R Cash receipts Cash payments to suppliers for inventory Analyze COGS from Income Statement and Inventory and Accounts Payable from Balance Sheet Beg Inv COGS End Inv Purchases Beg A P Purchases End A P Cash payments Note If you prepare the Operating Section using the direct method only the approach changes The cash flow from Operating Activities is the same under both methods
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