2-11-08 by linzhengnd



Matching principle, match expenses to revenue

Chapter 18: The statement of Cash Flows
         After studying this chapter, you should be able to:
1: indicate the primary purpose of the statement
2: distinguish among operating, investing, and financining activities.
3: prepare a statement of cash flows

Go to the Journal Entry and ask: where’s the cash?
        Look at something at gross; you will have the balance sheet from the beginning of the year and
the end of the year (cash)

Operating, investing and the financing sections
        2 out of the 3 are same regardless which method you’re using. Operating is the odd ball; the
input and output are computed are different

Accrual method: when it’s received or paid
        AP and AR’s
               Change from accrual to cash
                      Go to the journal entry if there’s any cash

Indirect v. direct: input and output methods

Primary purpose: provide info of cash, operating and investing; where did the cash come from during
the period? What was the cash used for? Was there a change in the cash balance in the period?

Statement of change ON MIDTERM; show structure

Dividends to your shareholders are financing activities; interest to your bondholders is an operating
Interest from another company is an operating activity for me

Operating activities shows the companies cash provided by the company

Inflow: sales of goods
Returns of loans
To suppliers for inventory
Employees for services

Noncash activities: on the bottom of the statement or a footnote but IT MUST BE NOTED SOMEWHERE
         I.e.: insurance of common stock to purchase assets; Convert stock to bonds, issue debts to get
assets; exchange of plant assets

Compute the change between balance and the end of the year!

AR is revenues but they might not have been received; AP is operating expenses

Direct is more specific on the recording while indirect is less specific.

Purchasing equipment is an investing

Read but will not be held responsible of direct method
       Methony and breeker

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