ACT 205 Lecture Notes - Lecture 27: Operating Cash Flow, Current Liability, Current Asset
ACT Class notes 4-25-18
Friday, April 27, 2018
10:02 AM
Statement of Cash Flows
-provides a summary of cash inflows/outflows during the reporting period
Order:
-operating activities
-investing activities
-financing activities
-net increase/decrease of cash
-beginning &ending cash balance
Steps in preparing:
1. Calculate net cash flows from operating activities
a. Income statement
i. Depreciation
ii. amortization
iii. gain/loss
b. Comparative balance sheets
i. Current assets other than cash
ii. Current liabilities
2. Calculate net cash flows from investing activities
a. Comparative balance sheets
i. Long-term assets
3. Calculate net cash flows from financing activities
a. Comparative balance sheets
i. Long-term liabilities
ii. Stockholders' equity
4. Combine operating, investing, and financing activities
a. Make sure total agrees with net increase/decrease in cash
Indirect and Direct methods
-differ only in the presentation format for operating activities
-both methods report investing, financing, and noncash activities identically
*We will focus on the indirect method
Operating Activities: Indirect method
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