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Cash Flow from investing activities Cash Flow from financing activities
Total (positive or negative) cash flow is added to beginning cash balance and should result in ending cash balance
Current Liabilities
except s-t notes payable which are financing
Revenue and Expenses (includes interest expense and revenue, and dividends received)
General Theory
Take revenue or expense account (includes cash and accrual) adjust out accrual amounts Result is net cash in or out.
Too expensive to classify all cash transactions into operating, financing, investing activities. Cheaper to use accrual systems and adjust out accrual information
- increases in current assets + decreases in current assets + increases in current liabilities - decreases in current liabilities = Net cash from operating activities
Whole cash amount received or paid. Look at change in investment and fixed asset accounts but may need more specific information
Example Equipment
Balance Sheet Amount Change: Beg $300,000, Ending $400,000 Can your just say net cash out for equipment was $100,000? Why?
Depreciation exp $110,000 ($50,000 increase in accum deprec from B/S + $60,000 acum depr reduced when sold equip added back in indirect method (make sure amt is not included in direct method
operating expenses
Cash paid for purchase of equipment $80,000 Noncash investing & financing Activities
Issued long-term note payable for some equipment $120,000
110,000
80,000 120,000
Financing Activities
Cash received from:
sale of stock issuance of debt
Look at change in stock, debt and retained earnings (May need more details) (for R/E only dividends portion applies to
financing activities while net income portion should tie into indirect method in operating activities)
In template must account for every change in B/S accounts and every item on income statement (some noncash items are adjusted out or not included in cash flow calculations)