New User Special Price Expires in

Let's log you in.

Sign in with Facebook


Don't have a StudySoup account? Create one here!


Create a StudySoup account

Be part of our community, it's free to join!

Sign up with Facebook


Create your account
By creating an account you agree to StudySoup's terms and conditions and privacy policy

Already have a StudySoup account? Login here

Financial Accounting Chapter 14 Notes

by: bauer47 Notetaker

Financial Accounting Chapter 14 Notes ACC-142

Marketplace > Iowa Central Community College > Accounting > ACC-142 > Financial Accounting Chapter 14 Notes
bauer47 Notetaker

Preview These Notes for FREE

Get a free preview of these Notes, just enter your email below.

Unlock Preview
Unlock Preview

Preview these materials now for free

Why put in your email? Get access to more of this material and other relevant free materials for your school

View Preview

About this Document

These notes go over the statement of cash flows.
Financial Accounting
DawnA. Humburg
Class Notes
25 ?




Popular in Financial Accounting

Popular in Accounting

This 5 page Class Notes was uploaded by bauer47 Notetaker on Thursday March 10, 2016. The Class Notes belongs to ACC-142 at Iowa Central Community College taught by DawnA. Humburg in Fall 2015. Since its upload, it has received 13 views. For similar materials see Financial Accounting in Accounting at Iowa Central Community College.


Reviews for Financial Accounting Chapter 14 Notes


Report this Material


What is Karma?


Karma is the currency of StudySoup.

You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 03/10/16
Chapter 14 Outline Statement of Cash Flows (SCF); ISREBS (done on the accrual basis); SCF (cash basis) Before we begin with SCF, let’s review the other financial statements: *IS > single step income statement (first 4 chapters; service); revenues – expenses =  net income (service business)         Multi­step income statement (Ch. 5); Sales Rev. (CR) – S. Disc. (DR) – SR&A  (DR) = Net Sales – COGS (DR) = Gross Profit – Total op. expenses = Operating  income + or – other revenue/expenses = net income *RE > statement of retained earnings; Beg. RE + net income (IS) – dividends = End. RE *BS > classified balance sheet; CA + Plant assets (PPE) = Total assets; CL+ LTL = Tot. liab. + SHE (two main parts are PIC and RE (list End. RE from RE) *note: all of these statement are completed using which basis of accounting? Accrual  (revenues are recorded when earned, expenses are recorded when incurred (created)) 1) SCF > this statement must be presented by a publicly­traded corporation whenever  they also disclose the income statement (statement of operations) **this is the only statement completed by corporate entities that addresses cash  flows  **why do we need this statement? To see why cash increased or decreased from year to year a. Classifying cash flows (OIF): a. O > operating; these are activities that a business would normally  complete b. I > investing activities involving the purchase and/or sale of long­term  assets (building, land, trucks) including investments in other company’s stocks and bonds (financial instruments) c. F > financing; activities that a publicly­traded corporation participates in that aid in financing the company such as paying dividends, securing  long­term debt (Bonds Payable or Note Payable); selling our own  stocks d. Non­cash investing and financing activities > these are basically trades that have no cash implications; disclosed in a separate statement b. Operating activities disclosure (two methods; both I and F will be the same  under either method): a. Indirect method > with this method we are starting with our bottom line  (also known as net income from the IS and undoing the effects of  accrual basis accounting i. Steps to prepare the indirect method of SCF: 1. Compare this year’s and last year’s BS figures (called a  comparative BS; page 814); calculate the increase or  decrease from the prior year to this year (start with oldest year and – this year’s figures) 2. Analyze the IS (net income) 3. See page 816; start with O: a. Net income from the IS b. Adjustments (undo the effects of these): i. GLAD: 1. G > gain (when MV > BV for a long­ term asset); these will be subtracted  because they were added on the IS 2. L > loss (when BV > MV for a long­ term asset); these will be added  because they were subtracted on the IS 3. A > amortization; these will be added because they were subtracted on the IS 4. D > depreciation; these will be added because they were subtracted on the IS ii. Changes in CA and CL (operating assets  and liabilities; we need to look at the  comparative BS): 1. Increase in A/R > why? We sold  more on account than customers  paid us; we did not collect cash;  cash is inversely related to all CA’s;  if A/R goes up, Cash goes down 2. Decrease in Mer. Inv. > we  purchased less than we sold; we  sold more than we purchased; cash  goes up (inverse) 3. Increase in A/P > we purchased  more on account than we paid on  account; direct relationship with  cash, increase in A/P means an  increase in Cash 4. Decrease in accrued liabilities > cash goes down 5. Summary: CA and Cash are  inversely related; CL and Cash are  directly related c. Net the operating activities > $70,000 in text  indicates cash inflows from operating d. Investing activities (note: investing activities are  presented exactly the same way under both the  indirect and direct methods of disclosing the  operating activities section): i. Cash payment for acquisition of plant  assets > you paid cash so the amount is  listed as a negative amount ii. Cash receipt from disposal of plant assets > cash inflow from selling; note that the  outflow and inflow are reported separately iii. Net investing activities > the net is a  negative number (260,000) because more  cash was paid than received e. Financing activities: (note: financing activities are  presented exactly the same way under both the  indirect and direct methods of disclosing the  operating activities section). i. Issuance of notes payable (also called  securing long­term debt; we borrowed  money) > cash inflow  ii. Cash payment of notes payable > paid off  another note payable > cash outflow iii. Cash receipt from issuance of common  stock > remember with this that we need to  add the change in Common Stock plus the  change in PIC­Excess over par, Common  to get the amount of cash  iv. Cash payment for the purchase of treasury  stock > this is merely the cost to us v. Cash payment of dividends > we are paying dividends to our stockholders (we sell stock as part of our financing activities also) f. Net cash provided by financing activities >  indicates a positive number of net cash inflow g. Net OIF > this will be called net increase or  decrease in cash and it should match the increase or decrease on the comparative balance sheet h. Cash at beginning of year (or end of last year)  from comparative BS i. Cash at end of year (current year); should tie to  the comparative BS 4. Net increase or decrease in cash + beginning cash  balance = ending cash balance (all these amounts should tie into the comparative BS) 5. In addition, you will need to know pertinent information  about investing and financing activities (must be given) b. Direct method > appendix to this chapter > this is a different way to  display operating activities only i. Cash collections from customers > you are solving for an  unknown in your a/r account; see page 830 ii. Cash receipts of interest > from the IS iii. Cash receipts of dividends > we have invested in other  company’s stocks > this amount is the same as the amount  listed on the IS (usually) iv. Payments to suppliers > we are solving for a couple of  unknowns; see page 832; COGS – Beg. Mer. Inv. + end. Mer.  Inv. + beg. a/p – end. a/p = cash paid for merc. Inv.­­­­THEN  calculate the unknown in a/p c. Free cash flow > cash flow from operating activities – cash paid for planned  investments in LT assets – cash dividends; tells us what amount of cash is  available for emergencies or reserves. 


Buy Material

Are you sure you want to buy this material for

25 Karma

Buy Material

BOOM! Enjoy Your Free Notes!

We've added these Notes to your profile, click here to view them now.


You're already Subscribed!

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

Why people love StudySoup

Bentley McCaw University of Florida

"I was shooting for a perfect 4.0 GPA this semester. Having StudySoup as a study aid was critical to helping me achieve my goal...and I nailed it!"

Anthony Lee UC Santa Barbara

"I bought an awesome study guide, which helped me get an A in my Math 34B class this quarter!"

Jim McGreen Ohio University

"Knowing I can count on the Elite Notetaker in my class allows me to focus on what the professor is saying instead of just scribbling notes the whole time and falling behind."

Parker Thompson 500 Startups

"It's a great way for students to improve their educational experience and it seemed like a product that everybody wants, so all the people participating are winning."

Become an Elite Notetaker and start selling your notes online!

Refund Policy


All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email


StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here:

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.