管理會計學(xué)英文版課件：Chap17 Statement of Cash Flows

1、Chapter 16“How Well Am I Doing?”Statement of Cash FlowsLearning ObjectivesClassify changes in noncash balance sheet accounts as sources or uses of cash. Classify transactions as operating, investing, or financing activities. Prepare a statement of cash flows using the indirect method and the direct

2、method to determine the net cash provided by operating activities. Purpose of the Statement of Cash FlowsAre cash flows sufficient to support ongoing operations?Can we meet our obligations to creditors?Can we pay dividends?Why is there a difference between net income and net cash flow?Will the compa

3、ny have to borrow money to make needed investments?CashThe term cash on the statement of cash flows refers broadly to both currency and cash equivalents.CashT-billsMoney Market FundsCommercial PaperCurrency and Bank AccountsNet Cash Flows for a PeriodNet IncomeDividends Paid to StockholdersChanges i

4、n Noncash AssetsChanges in LiabilitiesChanges in Capital StockConstructing the Statement of Cash Flows Using Changes in Noncash Balance Sheet AccountsConstructing the Statement of Cash Flows Using Changes in Noncash Balance Sheet AccountsConstructing the Statement of Cash Flows Using Changes in Nonc

5、ash Balance Sheet AccountsConstructing the Statement of Cash Flows Using Changes in Noncash Balance Sheet AccountsExample: Inventory is purchased on credit from a supplier.It is implied that cash was used to acquire the inventory.Increases in noncash asset accounts imply uses of cash. It is implied

6、that an increase in a payable has the effect of increasing cash available for other uses.Increases in liability accounts imply sources of cash.Example: Inventory is purchased on credit from a supplier.Constructing the Statement of Cash Flows Using Changes in Noncash Balance Sheet AccountsDecreases i

7、n noncash assets accounts imply sources of cash. Example: Accounts receivable decreases when a company pays its bill.When the customer pays the bill, the companys cash increases.Constructing the Statement of Cash Flows Using Changes in Noncash Balance Sheet AccountsConstructing the Statement of Cash

8、 Flows Using Changes in Noncash Balance Sheet AccountsDecreases in liability accounts imply uses of cash.When the payment is made, cash decreases.Example: A company pays a note payable held by a creditor.A Simplified Statement of Cash Flows: An ExampleAdditional Information:There was a net loss for

9、the year of $27,000.Depreciation charges for the year were $6,000.During the year, Ed sold land originally costing $32,000 for $32,000.During the year, Ed paid dividends of $3,000 to the stockholders.Ed issued $50,000 of common stock to settle the note due to Joe Doe.A Simplified Statement of Cash F

10、lows: An ExampleA Simplified Statement of Cash Flows: An ExampleHere is a summary of the sources of cash for Eds Pizza Hut.A Simplified Statement of Cash Flows: An ExampleHere is a summary of the uses of cash for Eds Pizza Hut.The net cash flow for Eds Pizza Hut is ($19,000): $66,000 in sources minu

11、s $85,000 in uses.A Simplified Statement of Cash FlowsThis simplified approach does not follow the format required for external reporting purposes. It is for illustrative purposes only.The Full-Fledged Statement of Cash Flows: Operating ActivitiesOperating activities are those activities that enter

12、into the determination of net income.Transactions affecting current assetsTransactions affecting current liabilitiesChanges in noncurrent balance sheet accounts that directly affect net incomeThe Full-Fledged Statement of Cash Flows: Investing ActivitiesInvesting activities relate to transactions in

13、volving the acquiring or disposing of noncurrent assets.Acquiring or selling property, plant and equipmentAcquiring or selling securitiesLending money to another entity and subsequently collecting on the loanThe Full-Fledged Statement of Cash Flows: Financing ActivitiesFinancing activities relate to

14、 transactions involving borrowing from creditors or repaying creditors and engaging in transactions with the companys owners.Issuing stock and purchasing treasury stockPayment of dividends (note that interest on debt is classified as an operating activity)Issuing long-term debt and repayment of debt

15、.The Full-Fledged Statement of Cash Flows: An OverviewThe Full-Fledged Statement of Cash Flows: An OverviewOperating ActivitiesInvesting ActivitiesFinancing ActivitiesReconciliation of the beginning cash balance with the ending cash balanceNoncash Investing and Financing ActivitiesOperating Activiti

16、esIncludes those activities that enter into the determination of net income.Operating ActivitiesSources of cash are added to net income and uses of cash are subtracted from net income.Operating ActivitiesOperating ActivitiesDepreciation and Amortization charges are added back to net income because t

17、hey are decreases in noncash assets.Operating ActivitiesLosses are added back to net income.Operating ActivitiesGains are subtracted from net income.Includes transactions that involve the acquisition or disposal of noncurrent assets.Investing ActivitiesIncludes transactions involving receipts from o

18、r payments to creditors and owners.Financing ActivitiesOther Issues: Direct Method or Indirect Method?Two Formats for Reporting Operating ActivitiesReports the cash effects of each operating activityStarts with accrual net income and converts to cash basisDirect MethodIndirect MethodNo matter which

19、format is used, the same amount of net cash flows from operating activities is generated.A Full-Fledged Statement of Cash Flows: An Indirect Method ExampleLets revisit the comparative balance sheet account balances for Eds Pizza Hut.A Full-Fledged Statement of Cash Flows: An ExampleAdditional Inform

20、ation:There was a net loss for the year of $27,000.Depreciation charges for the year were $6,000.During the year, Ed sold land originally costing $32,000 for $32,000.During the year, Ed paid dividends of $3,000 to the stockholders.Ed issued $50,000 of common stock to settle the note due to Joe Doe.L

21、ets also refresh our memory regarding the following additional information.Preparing the Statement of Cash Flows: Step 1List each account appearing on the comparative balance sheets except for cash and cash equivalents and retained earnings.Preparing the Statement of Cash Flows: Step 2Compute the ch

22、ange from the beginning balance to the ending balance for each account.Preparing the Statement of Cash Flows: Step 3Code each entry on the worksheet as a source or use of cash.Recall that the transaction involving the Notes Payable and Common Stock was noncash.Preparing the Statement of Cash Flows:

23、Step 4Code sources of cash as positive numbers and uses of cash as negative numbers.Preparing the Statement of Cash Flows: Step 5Make any necessary adjustments, including adjustments for gains and losses. The net effect of these should equal zero.We need to make an adjustment for the noncash transac

24、tion relating to Notes Payable and Common Stock.Preparing the Statement of Cash Flows: Step 6Classify each entry as operating, investing or financing activity.Preparing the Statement of Cash Flows: Step 7Copy the data from the worksheet into the Statement of Cash Flows section by section.Preparing t

25、he Statement of Cash Flows: Step 8Prepare a cash reconciliation at the bottom of the statement.In addition, on the face of the statement or in a supplemental schedule, disclose the issuance of $50,000 of stock to a creditor, a noncash financing activity.Example Indirect MethodInterpretation of the S

26、tatement of Cash FlowsExamine the operating activities section carefully.Eds Pizza Hut generated a negative cash flow from operations of $48,000. This is usually a sign of fundamental difficulties.Ultimately, a positive cash flow is necessary to avoid liquidating assets or borrowing money to pay for

27、 day-to-day activities.Other Issues: Gross or Net?For investing and financing activities, items on the statement of cash flows should be presented in gross amounts rather than in net amounts.Example:Assume Macys purchases $50 million in property during the year and sells other property for $30 milli

28、on.Instead of showing the net change of $20 million, the company must report the gross amounts of both transactions.The Direct Method of Determining the Net Cash Provided by Operating Activities Appendix 15AComputing Net Cash Provided by Operating ActivitiesThe direct method computes net cash provid

29、ed by operating activities by reconstructing the income statement on a cash basis from top to bottom.Cash provided by operating activities under the direct method will always agree with the amount computed using the indirect method.Similarities and Differences in Handling DataAdjustments for accounts that affect revenue are the same in the direct and indirect methods.Adjustment