8.3 Statement of Cash Flow
The statement of cash flow is a statement that shows the cash effects on operating,investing,and financing activities of company for accounting period.It explains the results and causes of the net cash increase or decrease during the accounting period.In this statement ,the cash is defined to include both cash treasury,cash in bank and cash equivalents.
8.3.1 Classifications of Cash Flows
The statement of cash flows reports cash flows by 3 types of activities:
(1) Cash flows from operating activities are cash flows transactions that affect net income.
(2) Cash flows from investing activities are cash flows from transactions that affect the investments in non-current assets.Examples of such transactions include the sale and purchase of fixed assets,such as equipment and buildings.
(3)Cash flows from financing activities are cash flows from transactions that affect the equity and debt of the business.Example of such transactions include issuing or retiring equity and debt securities.
8.3.2 A Complete form
Kent Inc. Statement of Cash Flows
For the year Ended December 31,2018
Cash flows from operating activities: | |
Cash received from customers | $1,171,000 |
Less:Cash payments for merchandise | $785,200 |
Cash payments for operating expenses | 193,800 |
Cash payments for interest | 8,000 |
Cash payments for income taxes | 83,500 |
Net cash flow from operating activities | $100,500 |
Cash flows from investing activities: | |
Cash from sales of investments | $57,000 |
Less:Cash paid to purchase machinery | $60,000 |
Net cash flow used for investing activities | (3,000) |
Cash flows from financing activities: | |
Cash received from sale of common stock | $48,000 |
Less:Cash paid to retire bonds payable | $50,000 |
Cash paid for dividends | 24,000 |
Net cash flow used for financing activities | (26,000) |
Increase in cash | $71,500 |
Cash at the beginning of the year | 26,000 |
Cash at the end of the year | $97,500 |
Schedule Reconciling Net Income with Cash Flows from Operating Activities: | |
Net income | $108,000 |
Add:Depreciation | $7,000 |
Decrease in inventories | 8,000 |
Increase in accrued expenses | 2,200 |
Deduct:Increase in accounts receivable | $9,000 |
Decrease in accounts payable | 3,200 |
Decrease in income taxes payable | 500 |
Gain on sale of investments | 12,000 |
Net cash flow from operating activities | $100,500 |
