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Preparing the Cash Flow Stmt (Indirect) - Proofs.docx

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ACC 110
Marla Spergel

Preparing the Cash Flows from Operating Activities Section of the Cash Flow Statement  Step 1— Start with net income  Step 2 — Add and/or subtract any non-cash items, likely depreciation, and gains and losses  Step 3 — Calculate the differences and changes in all balance sheet accounts to determine if there is an increase or decrease for each item, apply the changes in only the NON-CASH WORKING CAPITAL ITEMS (current assets and liabilities) in the OPERATING ACTIVITIES SECTION. (E.G. Adjust for changes like the impact of increases or decreases in the balances of A/R, Inventory, A/P, etc.)  Step 4 — Read all provided additional information to ensure you possess all relevant details to move forward and prepare the actual statement — Calculate PROOFS (as required) CAPITAL ASSET PROOF Opening Balance $ XXX Deduct: Sale of Capital Asset (at Historical Cost) (XX) Add: Purchase of New Capital Asset (at Historical Cost) XX Closing Balance $ XX  Necessary opening and closing balances are obtained from the balance sheet(s) provided. An additional piece of information must also be available to you (either the Proceeds from Sale or the Purchase Price) in order to determine the remaining unknown figure. This info will likely be provided in the additional information for the problem. ACCUMULATED AMORTIZATION PROOF Opening Balance $ XXX Deduct: Acc. Amort. From Sale of Capital Asset (XX) Add: Current Year's Amort. Expense from Income Stmt
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