ACTG 2200 Lecture Notes - Lecture 3: Cash Flow Statement, Petty Cash, Money Market

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Statement of Cash Flows
What came in and what went out
Methods
1. Direct (conceptually better method)
a. Adjust items on income statement
b. Directly show cash inflows and outflows from operations
2. Indirect (Easier and less costly)
a. Begin with net income
b. List adjustments to net income in order to arrive at operating cash flows
i. Add expenses noncash
ii. Deduct revenues noncash
Sections (cash flows in OR out)
Operating
o Net income
Revenues and expenses
o Changes in current assets and liabilities
Changes in current assets
Changes in current liabilities
o EX: Sell goods for cash
Investing
o Property plant equipment
o Investments
o Changes in long term assets
o EX: Buy equipment
Financing
o Equity
o Long term debt
Changes in long term liabilities
Changes in common stock
Changes in retained earnings
o EX: Selling common stock
Balance Sheet
Taking what happens at the beginning to the end, and recording it on the
statement of cash flows sheet
Operating Activities
Inflows
o Sale of goods/services
o Receipt of interest and dividends
Outflows
o Purchase of inventory
o For operating expenses
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