Cash Flow Statement

October 11, 2012

currency Flow Statement
(continued)

Executive Summary
1.
2.
3.
4.
5.
6.

propose method
verificatory method
condition vs. indirect method
specie flowing from investing activities
Cash flow from financing activities
Complete hard currency flow statement

1. Direct method
Direct method
- Converts income statement from accrual basis to cash basis
- Encouraged by FASB 95
- Supplemental information required: reconciliation of bring in income
to cash provided by operations

1. Direct method
Cash flow from operations
Cash original from customers
Cash salaried to suppliers and employees
Interest received
Interest give
Income taxes paid
Net cash provided by operations

370,000
(310,000)
10,000
(4,000)
(15,000)
51,000

Presents net income on a
cash basis (from scratch)

2. Indirect method
Indirect method
- Adjusts net income for items that affected net income but did
non affect cash
- Supplemental information required: cash paid for income taxes
and for interest

2.



Indirect method
Cash flow from operations
Net earnings
render for depreciation
Provision for margin for doubtful accounts
Deferred income taxes
Loss on property, plant, and equipment disposals
Changes in operating(a) assets and liabilities:
Receivables increase
Inventories increase
Accounts payable increase
Accrued income taxes increase
Net cash provided by operations

40,000
6,000
1,000
1,000
2,000
(2,000)
(4,000)
5,000
2,000
51,000

Adjusts net income for
items that affected net
income but did not affect
cash

3. Direct vs. indirect method
Cash flow from operations (DIRECT)
Cash received from customers
Cash paid to suppliers and employees
Interest received
Interest paid
Income taxes paid
Net cash provided by operations

370,000
(310,000)
10,000
(4,000)
(15,000)
51,000

Cash flow from operations (INDIRECT)
Net earnings
Provision for depreciation
Provision for allowance for doubtful accounts
Deferred income taxes
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