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-   -   Indirect method of cash flows (https://www.askmehelpdesk.com/showthread.php?t=206889)

  • Apr 17, 2008, 11:43 AM
    mailme
    Indirect method of cash flows
    I Have To Prepare Annual Statement Of Cash Flow Using Indirect Methid Of Disclosing Cash Flows From Operations.

    The Given Data Is Ending Balance Beginning Balance

    Accounts Receivable 12000 19000
    Inventory 4000 11000
    Supplies 1000 2500
    Prepaid Rent 3500 3000
    Accounts Payable 15000 14000
    Unearned Rent Revenue 6000 1500
    Salaries Payable 1000 2000


    During The Year, The Following Transactions Were Recorded
    The Purchase Of Investment Securities $12,000
    The Payment Of Cash Dividends $3,000
    The Sale Of Land Costing $40,000 For Proceeds Of $54,000
    The Annual Depreciation Of Plant And Equipment $9,000
    The Issue Of Common Stock For Cash $5000
    Annual Accrual Net Income $156,000

    The Net Cash Is $214,500
    But Iam Getting $216,000

    Thx In Asvance
  • Apr 17, 2008, 02:42 PM
    SBU
    The indirect method splits the cashflow statement into three parts.

    1 - Operating Activities
    This would include the ending net income, you need to add back any depreciation or amortization. You also need to include the CHANGE in any receivables and payables. This would be YR 1 ending - YR 2 ending. If receivables increase than cash is negative because that is cash you did not receive but was included in net income. If payables increased cash is positive because that is cash you did not pay.

    2 - Financing Activities
    This would include any long-term bank notes you took out during the current year. Include the full amount of the notes.

    3 - Investing Activities
    This would include any cash injections from you or any outside investors. This would also include and stock that was issued for that year. If you invested in something than that would decrease your cash and would be a negative.

    This is pretty basic but you should be able to build it from there.

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