Acct 2301 1st Edition Lecture 6 Outline of Last Lecture I Analyzing and Recording Transactions Outline of Current Lecture II Adjusting Accounts and Preparing Financial Statements Current Lecture 9 3 Presentation of the balance sheet The balance sheet is presented as follows Illustration 11 Balance sheet for Friends Company Friends CompanyBalance SheetPeriod Ended 20X6 Assets Total Assets 8 500 8 500 Liabilities Equity Contributed Capital Retained Earnings Total Equity 2 000 Total Liability and Equity Claims 5 000 1 500 6 500 8 500 The balance sheet lists assets and corresponding claims liabilities and equity Any asset has a source so assets balance with claims That is why total assets equal the sum of total liabilities and equity 9 4 Presentation of the statement of cash flows The statement of cash flows has the following format 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 Illustration 12 Statement of cash flows for Friends Company Friends CompanyStatement of Cash FlowsFor the Period Ended 20X6 Cash Flows from Operating Activities Cash Receipts from Customers Cash Payments for Expenses Net Cash Flow from Operating Activities 3 000 1 000 2 000 Cash Flows from Investing Activities 0 Cash Flows from Financing Activities Cash Receipts from Borrowing Cash Receipts from Capital Acquisitions Cash Payments for Distributions Net Cash Flow from Financing Activities 2 000 5 000 500 6 500 Net Increase in Cash Plus Beginning Cash Balance 8 500 0 Ending Cash Balance 8 500 The statement of cash flows explains how the company obtained and used cash during a period Sources of cash are called cash inflows and uses of cash are known as cash outflows Cash inflows are sources of cash for example payments from customers capital acquisitions etc Cash outflows are uses of cash for example payments to vendors paying off bank loans etc The statement classifies cash inflows and outflows into three categories Operating activities explain cash generated through revenue and cash spent for expenses Investing activities include cash received or spent on productive assets and investments in the debt or equity of other companies Financing activities describe cash transactions associated with resource providers i e owners and lenders Illustration 13 Cash flow categories
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