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Session 4

Statement of Cash Flows. Session 4. Businesses are like Fruit Trees. Fruit = Operating Activities. Trunk & Branches = Investing Activities. Roots = Financing Activities. Statement of Cash Flows. FASB 95—1987 (ASC 230-10-45) Components Operating cash: Operations and working capital

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Session 4

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  1. Statement of Cash Flows Session 4 Intermediate Accounting I - Fall 2012

  2. Businesses are like Fruit Trees Fruit = Operating Activities Trunk & Branches = Investing Activities Roots = Financing Activities Intermediate Accounting I - Fall 2012

  3. Statement of Cash Flows • FASB 95—1987 (ASC 230-10-45) • Components • Operating cash: Operations and working capital • Investing cash: Non-current assets and investments • Financing cash: L/T debt, equity and dividends • Reconciliation of net inc. to ops. cash • Disclosure of non-cash invest. & financing transactions Intermediate Accounting I - Fall 2012

  4. Net Income vs. Cash FlowIndirect Method • Net Income • +/- Non-cash Items • +/- Changes in Operating Working Capital • = Cash Flow from Operations • Disclosure of interest and tax payments Intermediate Accounting I - Fall 2012

  5. Indirect vs. Direct Method • FASB prefers the direct method • FASB requires net income to cash from operations reconciliation • Components: • Cash from customers • Cash from dividends • Cash from interest income • Other operating cash receipts • Cash paid to suppliers • Cash paid to employees • Cash paid for taxes • Cash paid for interest • Other operating cash payments Intermediate Accounting I - Fall 2012

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