Академический Документы
Профессиональный Документы
Культура Документы
MEANING
A Cash flow statement of statement of changes in cash position between the beginning and end of the period. A cash flow statement shows the various sources of cash inflow and uses of cash outflow during a period thus explaining the changes in cash position of the business
1. Predict future cash flows 2. Evaluate management decisions 3. Determine the ability to pay dividends to stockholders and payments to creditors 4. Show the relationship of net income to the businesss cash flows
WHAT IS CASH?
Cash
on hand Cash in the bank Cash equivalents - highly liquid, shortterm investments that can be converted into cash with little delay
Money-market
1.
2.
3. 4.
5.
CFS is based on cash which is one element of the working capital A CFS records the cash inflows & Cash Outflows. CFS is mandatory in India CFS has to be presented as per AS-3 a statutory format as given by ICAI. CFS contains opening and closing balances of cash and cash equivalents.
2.
3.
4.
5.
A FFS is based on the concept of working capital A FFS indicates the sources from which funds have been generated and the uses to which they are put. FFS is not mandatory in India There is no mandatory format of FFS in India FFS does not contain any opening and closing balance
6.
7.
8.
9.
10.
CFS is used for estimating the firms short-term liquidity position CFS considers only the actual movement of cash & cash equivalents In CFS all working capital items are considered under Cash from Operations In CFS Cash from operations or cash lost due to operations are calculated A CFS is used as a tool of financial analysis which is used by the management of short term financial analysis and cash planning purpose
7.
8.
9.
10.
A FFS is used for long term planning A FFS considers the movement of funds on accrual basis In FFS all working capital items are taken to the schedule of changes in working capital statement. In FFS funds from operations or Funds lost due to operations are calculated. A FFS is useful in planning intermediate and long term Financing purposes.
revenues and cash payments for operating express are calculated and shown in the cash flow statement The difference between the total csh receipts and total cash payments resulting from operating activities. For eq,
i. ii.
iii.
iv. v.
vi.
Cash sales of goods and services Cash recived from debtors Cash payments for purchase of inventories Cash payments to creditors Cash payment for wages, salaries and other operating expenses Cash payments of income tax,etc.
Depreciation, Depletion and Amortization are not Cash transactions, thus Are ADDED back to Net Income.
10
or Sale
They appear in the Investing Section But... When Sold Are Reported on the Income Statement
Thus,
Add
LONG-TERM ASSETS
Sales CGS Gross Profit Loss on Sale of Equipment Depreciation Net Income $ $ 10,000 3,500 6,500 575 4,000 1,925
Entry for Sale of Equipment: Cash A/D - Depreication Loss on Sale Equipment Debit Credit 4,500 1,500 575 6,575
12
13
Sales CGS Gross Profit Loss on Sale of Equipment Depreciation Net Income $ $ 10,000 3,500 6,500 575 4,000 1,925
So $2,500 in Sales are NOT cash Any increase in Current Assets either uses cash
Increase Inventory Decrease Cash
Sales Journal Entries: Cash Sales Accounts Receivable Sales Debit Credit 7,500 7,500 2,500 2500
Accounts Receivable
14
If Inventory, Supplies or other current assets decrease that means we debited an expense but did not credit Cash
So
16
Sales CGS Gross Profit Salary Expense Loss on Sale of Equipment Depreciation Net Income $ $ 10,000 3,500 6,500 1,000 575 4,000 925
Salary Expense Journal Entries: Debit Salary Expense Cash Salary Expense Salary Payable 875 875 125 125 Credit
Net income Depreciation/amortization Loss on sale of long-term assets Decreases in current assets other than cash Increases in current liabilities Negative Items Net loss Gain on sale of long-term assets Increases in current assets other than cash Decreases in current liabilities
18
Negative Items Acquisition of plant assets Purchase of investments that are not cash equivalents Making loans to others
19
Negative Items Payment of dividends Purchase of treasury stock Payment of principal amounts of debts
20
20x1 Inc/dec)
$ 42 80 1 138 7 219 $487 $ (20) 13 2 (3) 1 11 234 $238
22
20x1 Inc/dec)
$ 57 $ 34 6 (2) 3 (2) 77 83
INCOME STATEMENT
Anchor Corporation Year Ended December 31, 20x2 (In thousands) Revenues and gains: Sales revenue $284 Interest revenue 12 Dividend revenue 9 Gain on sale of plant assets 8 Total revenues and gains $313
24
INCOME STATEMENT
Anchor Corporation Year Ended December 31, 20x2 (In thousands) Expenses: Cost of goods sold $150 Salary and wage expense 56 Depreciation expense 18 Other operating expense 17 Interest expense 16 Income tax expense 15 Total expenses $272
25
INCOME STATEMENT
Anchor Corporation Year Ended December 31, 20x2 (In thousands) Total revenues and gains $313 Total expenses 272 Net income $ 41
26
Net Income Adjustments to reconcile net income to net cash provided by operating activities: A Depreciation B Gain on sale of plant
$41
18 (8)
27
C Increase in accounts receivable (13) C Increase in interest receivable (2) C Decrease in inventory 3 C Increase in prepaid expenses (1) C Increase in accounts payable 34 C Decrease is salary payable (2) C Decrease in accrued liabilities (2) 27 Net cash provided by operating activities $68
28
Cash flows from investing activities: Acquisition of plant assets $(306) Loan to another company (11) Proceeds from sale of plant assets 62 Net cash used for investing activities $(255)
30
Cash flows from financing activities: Proceeds from issuance of common stock Proceeds from issuance of long-term debt Payment of long-term debt Payment of dividends Net cash provided by financing activities
31
32
33
$300 70 100
$470