Introduction to Accounting Preparing for a User’s Perspective What is the standard format for a Statement of Cash Flows and what information does it provide? Debits and Credits Trainer By Kevin C. Kimball, CPA with support from www.canvas.net Free Jan. 2014 Available on the Google Play Store

Statement of Cash Flows Businesses don’t fail if they: Just keep it coming Business Have enough to pay on time Do pay on time Lenders & Creditors

Hmmm. What’s going on with their cash? + Cash Sources Statement of Cash Flows Cash Balance Cash Flows - Cash Uses Creditors, lenders & investors

Statement of Cash Flows For the year ended Income Statement and Statement of Stockholder Equity Statement of Cash Flows Balance Sheet Balance Sheet + Cash Sources - Cash Uses As of Dec 31, X1 Dec 31, X2 As of

Statement of Cash Flow Formulas + Cash Inflows – Cash Outflows Begin. Cash = End. Cash ABC Company Statement of Cash Flows For the year ended 12/31/X3 1/1/X3 12/31/X3 Cash inflows Operating activities Investing activities Financing activities = Change in cash Cash balance + Beginning cash = Ending cash Cash outflows What are the General-Purpose Financial Statements - Video Slide 10

Operating Activity Cash Flows Impact current assets and current liabilities Receipts-> ->Payments To support core business operations

Receipts-> Operating Cash Inflows 1) Cash received from customers That will be $3,000 cash please. Receipts-> 2) Cash dividends received on investments Increase cash but usually reduce non-cash current assets 3) Cash received for interest on loans To support core business operations

->Payments Operating Activity Cash Outflows 1) Cash paid to suppliers 2) Cash paid for salaries and wages Please pay for our scalpels and buy some new ones. Hoorary!!!! Today is payday. ->Payments 3) Cash paid for utilities Did you remember to pay the utilities? Reduce cash and usually reduce current liabilities 4) Interest paid To support core business operations

R Sales-> ->Purchases Investing Activity Cash Flows Cash paid to purchase and cash received upon sale of long-term assets

R Sales-> Investing Activity Cash Inflows Sales of vehicles, buildings, etc. R Sales-> Increase cash but usually reduce long-term assets

R ->Purchases Investing Activity Cash Outflows Purchase of vehicles, buildings, etc. R ->Purchases Reduce cash and usually reduce long-term assets

Financing Activity Cash Flows Receipts-> ->Payments Cash from or used for: long-term debt contributed capital

Financing Activity Cash Inflows Issue stock to Borrow using long-term debt from Receipts-> Increase cash and either increase long-term debt or contributed capital

Financing Activity Cash Outflows Dividends paid to and stock repurchased from Pay off long-term debt to ->Payments Reduce cash and usually reduce long-term debt, contributed capital, or retained earnings

Which business would you want to own? Which is probably more capable of: Paying off debt? Increasing shareholder value? Paying dividends?

This baby’s healthy + $65 M Nothing (88) M

(27) M + 79 M Long-term assets should increase operating cash flows. Cash from sales used to pay for operating cash flows. + 79 M

(29) M + 18 M

Introduction to Accounting Preparing for a User’s Perspective What is the standard format for a Statement of Cash Flows and what information does it provide? Debits and Credits Trainer By Kevin C. Kimball, CPA with support from www.canvas.net Free Jan. 2014 Available on the Google Play Store