978-0077633059 Chapter 12 Lecture Note Part 2

subject Type Homework Help
subject Pages 6
subject Words 482
subject Authors John Wild, Ken Shaw

Unlock document.

This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
page-pf1
12-11
page-pf2
VISUAL #12-2
STEPS TO DETERMINE INFORMATION
STATEMENT OF CASH FLOWS
1. Find change in Cash—This is the target number.
2. Find cash flow from operations
(Using direct or indirect method)
3. Find Cash Flow from A. Financing and
B. Investing
Procedure:
In real life: Using data from comparative balance sheets, trace
changes through ledgers and journals probably using a worksheet
to organize, analyze, and prove data disclosed.
In the classroom: Determine the changes in noncurrent accounts
and notes from comparative balance sheets. Use the relevant data
the text provides that comes from the ledgers and the journals to
systematically analyze the data using chart and/or reconstructing
journal entries.
4. Combine cash flows from all three activities (from 2 and 3) to find
net cash flow and prove change in cash. (Target number
determined in Step 1).
Note: Once the above information has been gathered, the statement
can be prepared following the required format. If the direct method
was used, GAAP requires a reconciliation of net income to cash
provided from operations.
12-12
page-pf3
12-13
page-pf4
VISUAL #12-3
Determining Cash Flows from Operating Activities
Direct Method
(Need income statement and balance sheet data)
1. Cash = Sales + Decrease in
Receipts Accounts
from Customers* Receivable
or
- Increase in
Accounts
Receivable
2. Cash = Cost of + Increase in + Decrease in
Payments Goods Sold Inventory Accounts
to Suppliers or Payable
- Decrease in - Increase in
Inventory Accounts
Payable
3. Cash = Operating + Increase in + Decrease in - Depreciation
Payments Expenses Prepaid Accrued and Other
for Expenses Liabilities Noncash
Operating** or or Expenses
Expenses - Decrease in - Increase in
Prepaid Accrued
Expenses Liabilities
4. Cash = Income + Decrease in
Payments Taxes Income
for Expense Taxes
Income Payable
Taxes or
-Increase in
Income
Taxes
Payable
5. Cash = Interest + Decreases in
Payments Expense Interest Payable
for - Increase in
Interest Interest Payable **Wage expense would be
taken out if CP for wages was
*use similar computations for to be reported separately.
CR from Interest &/or Dividends The related prepaids and
CR from Rent payables would be considered
in the computation.
12-14
page-pf5
12-15
page-pf6
VISUAL #12-4
1. Write-offs or noncash 1. Gains
expenses 2. Increases in current assets
2. Losses 3. Decreases in current
3. Decreases in current assets liabilities
4. Increases in current
liabilities.
12-16

Trusted by Thousands of
Students

Here are what students say about us.

Copyright ©2022 All rights reserved. | CoursePaper is not sponsored or endorsed by any college or university.