Chapter 4, Statement of Cash Flow markdawkins：4章现金流markdawkins声明

1、chapter 4 - statement of cash flows: effects operating, investing, financing activities on cash flows clyde p. stickney and roman l. weillearning objectives1. understand why using the accrual basis of accounting to prepare the balance sheet and income statement creates the need for a statement of ca

2、sh flows.learning objectives4. distinguish between the direct and indirect methods of reporting and analyzing cash flows from operations. 5. develop an ability to analyze the statement of cash flows, including the relation among cash flows from operating , investing, and financing activities for bus

3、inesses in various stages of their growth.chapter outline1. need for a statement of cash flows2. overview of the statement of cash flowsstatement of cash flowsthe statement of cash flows three classifications of cash flows example of a statement of cash flowspreparing the statement of cash flowsfirm

4、s could prepare the cash flow statement directly from the cash account. most, however, find it more efficient to prepare the cash flow statement from the balance sheet and income statement.define direct and indirect method of presentation calculates cash flow from operations by subtracting cash disb

5、ursements to supplies, employees, and others from cash receipts from customers. calculates cash flow from operations by adjusting net income for noncash revenues and expenses.umost firms present their cash flows using the indirect method.algebraic formulationrecall the basic accounting equation:or a

6、ssets are either cash (c) or non cash assets (n$a), sowhere means the change in the balance,rearranging gives the basic equation for the statement of cash flows:algebraic formulation (cont.)uthe change in cash, is the increase or decrease in the cash account.uthis amount must equal changes in liabil

7、ities changes in shareholders equity changes in assets other than cash.uthus, we can identify the causes in the change in the cash account by studying the changes in non-cash accounts.two approaches to producing the cash flow statementthe basic formula can be implemented using either of two approach

8、es:columnar worksheetuworks well for relatively simple situations involving few transactions.uenhances understanding of the cash flow statement.udoes not work as well as the t-account method when the number and complexity of transactions increases.columnar worksheet (cont.)noncash expensesunoncash e

9、xpenses, such as depreciation expense, are added back. uitems that are truly not sources of cash, even though they are associated with cash inflows; rather, a reversal of the accrual process that required the expenses to be recognized without regard for the cash flow. changes in specific accountsif

10、noncash assetsare increased, then cash was spent,so cash is an outflow,negative sign.if noncash assetsare decreased,then they provided cashso cash is an inflow,positive sign.if liab. or s.e.increased, then cashwas obtained,so cash in an inflow,positive sign.if liab. or s.e.decreased, then cashwas sp

11、ent,so cash in an outflow,negative sign.non-cash assetsliabilitiesand shareholdersequityincreasedecreaset-account worksheetuthe columnar works well when the change in each balance sheet account affects only one of the three types of activities. it becomes cumbersome for more complex (and realistic)

12、situations.uthe t-account approach is a direct extension of t-accounts - facilitates analysis of a transaction which involves more than one activity.ufor example, the change in can be due to both net income (operating activity) and dividends (financing activity).t-account worksheet1. obtain beginnin

13、g and ending balance sheets.2. prepare a t-account worksheet with a master account, cash, divided into operating, investing and financing sections.3. explain the change in the master cash account by reconstructing the original entries in a summary form.4. make any necessary adjustments.5. recast the

14、 master account in the format of a cash flow statement.t-account worksheet (cont.) cashbeginningbalance operationsinvesting financingendingbalancevarious balance sheet accountsbeginningbalance endingbalance#1. adjustments are made to all balance sheet accounts to bring the beginning balance to the e

15、nding balance.2. these are offset by an opposite entry in the cash account.3. this part of the cash account becomes the cash flow statement.effects of sale of long-term assets on cash flowsua few transactions complicate the derivation of a cash flow statement from a comparative balance sheet, for ex

16、ample, the sale of a long-term (or fixed) asset.urecall the journal entry for the sale of an asset:cash #accumulated depreciation # asset # gain (or loss) on sale #sale of an asset (cont.)ueach of the four parts of the above journal entry require an adjustment in the cash flow statement.uthe first l

17、ine, cash, adds a line to the investing section.uthe second line, a debit to accumulated depreciation, increases the depreciation expense above the change in the change in the accumulated depreciation account.uthe third line, a credit to the asset, increases the amount of cash invested in long-lived

18、 assets above the change in the fixed asset accounts.uthe fourth line, a gain or loss, is reversed out in the operating sections since this is not a cash flow.comparison of cash flow to net incomeunet income is an accrual based concept and purports to show the long-term.ucash flows purport to show the short term.uconsider the outlook for both short-term and long-term and consider that each is either good or poor.ua strong growing firm would show both good long-term and good short-term outlooks.ua failing firm would show both poor long-term and poor short term outlo