ACC 311 Chapter 12: Chapter 12 Notes
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Department
Accounting
Course
ACC 311
Professor
Gretchen Charrier
Semester
Spring

Description
Chapter 12: Statement of Cash Flows ● Statement of cash flows ○ Reconciles beginning cash to ending cash ○ Converts accrual accounting income statement to cash basis statement of cash flows ● Cash Equivalents: Short-term investments with original maturities of three months or less that are readily convertible to cash and whose value is unlikely to change ○ Treasury bills ○ Money market funds ○ Commercial paper ● Cash Flows from Operating Activities (Cash Flows from Operations): Cash inflows and outflows directly related to earnings from normal operations ○ Direct Method ■ A method of presenting the operating activities section of the statement of cash flows that reports components of cash flows from operating activities as gross receipts and gross payments ■ Net Cash Provided By (Used By) Operating Activities = Inflows - Outflows ○ Indirect Method ■ A method of presenting the operating activities section of the statement of cash flows that adjusts net income to compute cash flows from operating activities ■ Net Cash Inflow (Outflow) from Operating Activities = Net Income +/- Adjustments for Noncash Items ■ Used by most large companies ■ Adjustments to reconcile net income to cash flows ● Add to convert (+) ○ Depreciation and amortization expense ○ Loss on sale of investing asset ○ Decreases in operating assets ○ Increases in operating liabilities ● Subtract to convert (-) ○ Gain on sale of investing asset ○ Increases in operating assets ○ Decreases in operating liabilities ○ Balance sheet accounts ■ Accounts receivable ■ Inventories ■ Prepaid expenses ■ Acc
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