Kế toán, kiểm toán - Chapter 24: The Statement of Cash Flows

1-*McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.The Statementof Cash Flows Section 1: Sources and Uses of CashChapter24Section ObjectivesDistinguish between operating, investing, and financing activities.Statement of Cash FlowsReviewed by creditors to determine how the firm will pay principal and interest on debts.Reviewed by investors to determine if the corporation will have the cash to pay dividends.Reviewed by management for information about cash to pay employees, suppliers, and other obligations.Sources of CashUses of CashOperating ActivitiesSale of merchandiseSale of servicesInterest incomeDividend incomeMiscellaneous incomePay for merchandisePay taxesPay salaries and wagesPay interest expensePay for other expensesSources of CashUses of CashInvesting ActivitiesSale of land, buildings, or equipment.Principal payments collected on receivable for long-term assets.Sale of investment in bonds or other securities.Pay for purchase of land, buildings, or equipment.Pay for the purchase of investments in bonds or other securities.Sources of CashUses of CashFinancing ActivitiesIssuance of common stock.Issuance of preferred stock.Issuance of bonds payable.Borrowing through signing a note payable.Resale of treasury stock.Pay cash dividends on common stock.Pay cash dividends on preferred stock.Repay bond indebtedness.Repay notes payable or other borrowing.Purchase treasury stock.The Statementof Cash Flows Section 2: Cash Flows from Operating ActivitiesChapter24Section ObjectivesCompute cash flows from operating activities.To prepare the statement of cash flows, you need four items. Income statement Schedule of operating expenses Statement of retained earnings Comparative balance sheetStatement of Cash FlowsThe schedule of operating expenses is a schedule that supplements the income statement.ANSWER:It shows the selling and general and administrative expenses in greater detailQUESTION:What is the schedule of operatingexpenses? Compute cash flows from operating activitiesObjective 2 Reconciles the beginning and ending cash balances. Ties together: income statement, changes in the noncash items on the balance sheet, changes in the noncash items on the statement of  retained earnings. Can be prepared in two different ways: direct method indirect methodStatement of Cash FlowsThis chapter illustrates the indirect methodCash Flows from Operating Activities Net income (or net loss) + or – Adjustments for noncash items on income statement + Decreases in current assets – Increases in current assets + Increases in current liabilities – Decreases in current liabilitiesIndirect Method = Net cash provided by operating  activitiesSummary of Effects of Changes in Current Assets and Current Liabilities Add to Deduct from Net Income Net IncomeIncrease in current asset xDecrease in current asset xIncrease in current liability xDecrease in current liability xThe Statementof Cash Flows Section 3: Cash Flows from Investing and Financing ActivitiesChapter24Section Objectives3. Compute cash flows from investing activities.Compute cash flows from financing activities.Prepare a statement of cash flows. Cash payments for purchases of property,  plant, and equipment. Cash payments for purchases of stocks and  bonds of other corporations.Cash Outflows from Investing ActivitiesCash Inflows from Investing ActivitiesSale of property, plant, and equipment. Sale of investments in securities of other corporations.Principal received on mortgages or notes held in connection with the sale of plant and equipment. Original issue of capital stock. Resale of treasury stock. Issue of bonds and notes payable.Cash Inflows from Financing Activities Purchase of treasury stock. Retirement of preferred stock. Payment of cash dividends. Repayment of debt obligations: Bonds payable Notes payable MortgagesCash Outflows from Financing ActivitiesInterest expense is an outflow from operating activities (not financing activities) If the indirect method is used, the notes accompanying  the statement must include: Interest paid Income tax paidDisclosures Required in the Statement of Cash Flows Operating Activities Investing and Financing Activities Noncash activities are disclosed on the statement.  Examples include: Issuing bonds payable for land Converting bonds payable into common stock