Reporting Format for the Statement of Cash Flows


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Reporting Format for the Statement of Cash Flows



Cash Flows from Operating Activities



Cash Flows from Investing Activities

  • Inflows

  • Selling property, plant, and equipment.

  • Selling investment securities.

  • Collecting loans.



Cash Flows from Financing Activities

  • Inflows

  • Borrowing.

  • Issuing stock.



Noncash Investing and Financing Transactions

  • Significant noncash investing and financing transactions must be reported separately.

  • Example: Issuing common stock in exchange for land.







Converting from Accrual to Cash-Basis Accounting

  • Accrual basis revenue includes sales that did not result in cash inflows.

  • Cash received from customers can be computed as follows:



Converting from Accrual to Cash-Basis Accounting



Converting from Accrual to Cash-Basis Accounting



Converting from Accrual to Cash-Basis Accounting



Converting from Accrual to Cash-Basis Accounting











Direct Method

  • Additional Information

    • The corporation sold equipment for $300 cash during the year. The equipment had an original cost of $1,500 and accumulated depreciation of $1,100 at the time of sale.
    • The corporation issued a $2,500 mortgage note in exchange for land during the year.
    • There was a $1,500 cash dividend paid during the year.












Cash Flow from Operating Activities



Direct Method







Cash Flow from Investing Activities







Cash Flow from Financing Activities







A Comparison of the Direct and Indirect Methods

  • Net cash flow is the same for both methods.

  • The Direct Method provides more detail about cash from operating activities.

  • The investing and financing sections for the two methods are identical.



Indirect Method



Indirect Method



Indirect Method

















Indirect Method



The Financial Analyst



The Financial Analyst



End of Chapter 14




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