CHAPTER SIX APPENDIX STATEMENT OF CASH FLOWS STATEMENT

CHAPTER SIX APPENDIX STATEMENT OF CASH FLOWS

STATEMENT OF CASH FLOWS • Fourth financial statement • Explains. . . – what the business did to generate cash and – how the cash was used • Categorizes all cash transactions into three types: – Operating, Investing, and Financing

OPERATING ACTIVITIES • Related to the revenues and expenses reported on the Income Statement • Examples: – Cash received from customers – Cash paid for wages – Cash paid for rent – Cash paid for insurance

INVESTING ACTIVITIES • Those transactions involving the purchase and sale of long-term assets, lending money, and collecting the principal of the related loans • Examples: – Cash paid to purchase equipment – Cash received from sale of old equipment

FINANCING ACTIVITIES • Those transactions dealing with the exchange of cash between the business and its owners and creditors • Examples: – Investment of cash by owner – Owner’s withdrawals – Cash paid to repay principal on a loan

ANALYSIS OF TRANSACTIONS CASH Event Class. Amt. Class. Invst. by Jessica Financing 2, 000 This is a transaction with the owner…… FINANCING ACTIVITY Event

ANALYSIS OF TRANSACTIONS CASH Amt. Class. Event Invest. by Jessica Financing 2, 000 1, 200 Investing Purch. Del. Eq. This is a transaction involving long-term assets…… INVESTING ACTIVITY

ANALYSIS OF TRANSACTIONS CASH Amt. Event Class. Invest. by Jessica Financing 2, 000 Amt. Class. Event 1, 200 Investing Purch. Del. Eq. 300 Financing Made loan pmt This transaction involves a creditor…… FINANCING ACTIVITY

ANALYSIS OF TRANSACTIONS CASH Amt. Event Class. Invest. by Jessica Financing 2, 000 Rec’d for services Operating 500 Amt. Class. Event 1, 200 Investing Purch. Del. Eq. 300 Financing Made loan pmt. This transaction involves an expense…. . OPERATING ACTIVITY

ANALYSIS OF TRANSACTIONS CASH Amt. Event Class. Invest. by Jessica Financing 2, 000 Rec’d for services Operating 500 Amt. Class. Event 1, 200 Investing Purch. Del. Eq. 300 Financing Made loan pmt. The remaining transactions are categorized in the same manner

ANALYSIS OF TRANSACTIONS CASH Amt Event Class. Invest. by Jessica Financing 2, 000 Rec’d for services Operating 570 Rec’d for services Operating 430 3, 500 Amt Class. 1, 200 Investing 300 Financing 200 Operating 50 Operating 80 Operating 200 Operating From this analysis 300 Investing we can prepare a 650 Operating Statement of Cash Flows. 150 Financing 3, 130 Bal. 370 Event Purch. Del. Eq. Made loan pmt. Paid office rent Paid tele. bill Purch. supplies Pd. for insurance Purch. Del. Equip Paid wages Withdrawal

Jessica Jane’s Campus Delivery Statement of Cash Flows For Month Ended June 30, 20 -Cash flow from operating activities: Operating Activities are shown first.

Cash flow from operating activities: Cash received from customers for services First item listed is the “inflow” of cash from customers. $1, 500

Cash flow from operating activities: Cash received from customers for services Cash paid for wages Cash paid for rent Cash paid for supplies Cash paid for telephone Cash paid for insurance $ (650) (200) (80) (50) (200) Next the “outflows” of cash are listed. “( )” are used to indicate the negative effect on the cash flow. $1, 500

Cash flow from operating activities: Cash received from customers for services Cash paid for wages Cash paid for rent Cash paid for supplies Cash paid for telephone Cash paid for insurance Total cash paid for operations Net cash provided by operating activities $ (650) (200) (80) (50) (200) $1, 500 (1, 180) $320 Since operating activities are the main purpose of the business, it is important to be able to generate positive cash flows from operating activities.

Cash flow from operating activities: Cash received from customers for services Cash paid for wages Cash paid for rent Cash paid for supplies Cash paid for telephone Cash paid for insurance Total cash paid for operations Net cash provided by operating activities Cash flows from investing activities: Investing activities are shown next. $ (650) (200) (80) (50) (200) $1, 500 (1, 180) $320

Cash flow from operating activities: Cash received from customers for services Cash paid for wages Cash paid for rent Cash paid for supplies Cash paid for telephone Cash paid for insurance Total cash paid for operations Net cash provided by operating activities Cash flows from investing activities: Cash paid for delivery equipment Net cash used for investing activities Cash flows from financing activities: Financing activities are shown last. $ (650) (200) (80) (50) (200) $1, 500 (1, 180) $ 320 $ (1, 500)

Cash flow from operating activities: Cash received from customers for services Cash paid for wages Cash paid for rent Cash paid for supplies Cash paid for telephone Cash paid for insurance Total cash paid for operations Net cash provided by operating activities Cash flows from investing activities: Cash paid for delivery equipment Net cash used for investing activities Cash flows from financing activities: Cash investment by owner Cash withdrawal by owner Payment made on loan Net cash provided by financing activities $ (650) (200) (80) (50) (200) $1, 500 (1, 180) $ 320 $ (1, 500) 2, 000 (150) (300) 1, 550

Cash flow from operating activities: Cash received from customers for services $ (650) Cash paid for wages Cash paid for rent (200) (80) Cash paid for supplies of the inflows and outflows (50) Cash. The paid sum for telephone Cash paid for insurance (200) from operating, investing, and financing Total cash paid for operations activities equals the change in the cash Net cash provided by operating activities Cash flows from investingbalance activities: this period. account Cash paid for delivery equipment Beg. balance Ending $370 Net cash used for$0 investing activities balance $ (1, 500) INCREASE Cash flows from financing activities: of $370 Cash investment by owner 2000 Cash withdrawal by owner (150) Payment made on loan (300) Net cash provided by financing activities Net increase in cash $1, 500 (1, 180) $ 320 (1, 500) 1, 550 $370