ADMN 2021H Lecture Notes - Lecture 8: Retained Earnings, International Financial Reporting Standards, Cash Flow Statement
28 Jun 2018
School
Department
Course
Professor
ADMN2021H: Financial Accounting II
Tuesday, March 6th, 2018
Lecture Week 8 – Chapter 13 – Cash Flow Statement
Learning Objectives:
1. Describe the content and format of the statement of cash flows
2. Prepare the operating activities section of a statement of cash flows using the indirect method
3. Prepare the investing and financing activities sections and complete the statement of cash flows
4. Use the statement of cash flows to evaluate a company
5. Prepare the operating activities section of a statement of cash flows using the direct method
Two Methods of Preparing the Statement of Cash Flow
1. Indirect method
2. Direct method
Format of Cash Flow Statement
Operating activities
(prepared using indirect or direct method) xx
net cash provided (used) by operating activities xx
investing activities
(list of individual receipts and payments) xx
net cash provided (used) by investing activities xx
financing activities
(list of individual receipts and payments) xx
net cash provided (used) by financing activities xx
net increase (decrease) in cash xx
cash, beginning of period xx
cash, end of period xx
Preparation of the Statement of Cash Flows
1. Prepare the operating activities section
2. Prepare the investing activities section
3. Prepare financing activities section
4. Complete the statement of cash flows
Prepare the Operating Activities Section Using the Indirect Method
-Start with net income and add or deduct items not affecting cash to arrive at net cash provided (used) by operating
activities
-+ noncash expenses such as deprecation and losses
-- noncash losses and gains
-+ decreases in current asset accounts and increases in current liability accounts
-- increases in current asset accounts and decreases in current liability accounts
Convert Profit to Net Cash Provided (Used) by Operating Activiteeaies:
-noncash expenses:
odeprecation expense (property and equipment) (add)
oamortization expense (intangible assets) (add)
-losses and gains:
olosses including impairment losses (add)
ogains and reversal of impairment loss (deduct)
-changes in certain noncash current asset and current liability accounts:
oincrease in current asset account (deduct)
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Lecture week 8 chapter 13 cash flow statement. Two methods of preparing the statement of cash flow. Preparation of the statement of cash flows: prepare the operating activities section, prepare the investing activities section, prepare financing activities section, complete the statement of cash flows xx xx xx xx xx xx xx xx xx. Prepare the operating activities section using the indirect method. Start with net income and add or deduct items not affecting cash to arrive at net cash provided (used) by operating activities. + noncash expenses such as deprecation and losses. + decreases in current asset accounts and increases in current liability accounts. Increases in current asset accounts and decreases in current liability accounts. Investing activities purchasing and disposing of: long-term investments not held for trading, long-lived assets generally includes non-current asset items (example, long-lived investments, property, plant and equipment) on the statement of financial position.
