COB 242 1st Edition Lecture 4Outline of Current Lecture 1. Statement of Cash Flowsa. Fundamental Principleb. Basic Equationsi. Asset accountsii. Contra-asset, liability, and stockholders’ equity accountsc. Organizationd. Operating Activitiesi. Direct methodii. Indirect methode. Indirect method steps Current Lecture1. Statement of Cash Flowsa. Fundamental Principlei. Change in cash balance = change in noncash balance sheet accountsb. Basic Equationsi. Asset accounts1. Beginning balance + debits – credits = ending balance ii. Contra-asset, liability, and stockholders’ equity accounts1. Beginning balance – debits + credits = ending balancec. Organizationi. Operating activity1. Revenue and expense transactions that affect net incomeii. Investing activity1. Acquiring or disposing of noncurrent assetsiii. Financing activity1. Borrowing from and repaying principal to creditors and transactions with stockholdersd. Operating Activitiesi. Direct method1. Reconstructs the income statement on a cash basis from top to bottom ii. Indirect method1. Accrual net income is adjusted to a cash basis (used by 99% of people)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.e. Indirect method steps i. Add description charges to new incomeii. Analyze net changes in noncash balance sheet accountsiii. Adjust for gains and