Ch 9 – Cash Flow

Name __________________________________________________________
ACCT 223 – Ch 9 Cash Flow Statement
1. Using the following information for 2023, calculate the net cash provided by
Operating Activities.
Net income
Depreciation & amortization expense
Increase in Accts Receivable
Increase in Inventory
Decrease in Office Supplies
Decrease in Other ST Liabilities
Increase in Accts Payable
$
$
$
$
$
$
$
225,000 add
60,000 add
30,000
40,000
25,000
15,000
45,000
2. Using the following information for 2023, calculate the net cash provided by
Investing Activities.
Purchase of building
Purchase of land
Purchase of equipment
Proceeds from sale of computers
Proceeds from sale of vehicles
Purchase of LT investments
Proceeds from sale of trademark
$
$
$
$
$
$
$
1,200,000
800,000
255,000
15,000
25,000
80,000
190,000
3. Using the following information for 2023, calculate the net cash provided by
Financing Activities.
Proceeds from issuance of LT mortgage payable
Payment on LT mortgage payable
Proceeds from issuance of preferred stock
Payment of dividends on preferred stock
$
$
$
$
1,500,000
5,000
800,000
15,000
4. Using the info from the above 3 problems, create a Cash Flow Statement
for the year ended 12/31/23 in proper format.
Beginning cash on 1/1/23 was $500,000.
Chapter 9
The Income Statement and the
Statement of Cash Flows
PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Charles W. Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA
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LO9
Statement of Cash Flows
(p.335)
Provides relevant information about the cash
receipts and cash payments of an enterprise
during a period. This statement shows why cash
and cash equivalents changed during the period
by reporting net cash provided or (used by) . . .



Operating
Activities
Investing
Activities
Financing
Activities
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LO9
Cash Inflows and Outflows
Operating Activities
Investing Activities
Financing Activities
Cash received
from revenues
Sale of operational assets
Sale of investments
Collections of loans
Issuance of stock
Issuance of bonds
and notes
Enterprise
Cash paid for
expenses
Purchase of operational assets
Purchase of investments
Loans to others
Payment of dividends
Repurchase of stock
Repayment of debt
Cash Outflows
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L O 10
Cash Flows from
Operating Activities
1. Operating activities relate primarily to the receipt
of cash for general sales or operating revenues
(what the entity is in business to sell)
2. Operating activities also relate primarily to the
disbursement of cash for general operating
expenses (day to day business expenses)
3. Transactions: ST Assets & ST Liabilities (accounts
receivable, inventory, supplies, ST investments,
accounts payable, wages payable, interest payable,
taxes payable, ST notes payable, etc.)
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L O 10
Cash Flows from
Investing Activities
1. Investing activities relate primarily to the purchase
and sale of noncurrent assets (land, buildings,
equipment, etc)
2. Investments in debt or equity securities of other
entities & lending of money and subsequent
collection of loans are considered investing
activities as well (LT Investments, LT Notes Rec)
3. Transactions: LT Assets (land, building, equipment,
furniture, software, computers, vehicles, intangible
assets, natural resources, LT investments, etc)
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L O 10
Cash Flows from
Financing Activities
1. Financing activities relate to the issuance of stock
(common stock preferred stock, treasury stock)
2. Financing activities also relate to the issuance of
long-term debt (bonds payable or notes payable)
3. Transactions: LT Liabilities & Stockholders Equity
(LT debt, LT notes payable, LT bond payable,
common stock, preferred stock, dividends, treasury
stock, etc.)
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Cash Flows from
Operating Activities:
◼ Start with Net income (add)
◼ Add back non-cash items:
◼ Depreciation/amortization/depletion expense
◼ Increase in ST assets
◼ Increase in inventory, accounts receivable
◼ Decrease in ST assets
◼ Decrease in inventory, accounts receivable
(cont’d→)
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Cash Flows from Operating
Activities (cont’d):
◼ Increase in ST liabilities
◼ Increase in accounts payable, wages payable
◼ Decrease in ST liabilities
◼ Decrease in accounts payable, wages payable
◼ Net cash provided by (used in) operating
activities
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Cash Flows from Investing
Activities:
◼ Increase in LT assets
◼ Purchase of land, buildings, equipment, etc.
◼ Decrease in LT assets
◼ Proceeds from sale of land, buildings, etc.
◼ Net cash provided by (used in) investing
activities
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Cash Flows from
Financing Activities:
Increase in LT liabilities
◼ Proceeds from issuance of LT debt, bonds pay
◼ Decrease in LT liabilities
◼ Payment on LT debt, bonds payable
◼ Increase in equity
◼ Proceeds from issuance of common stock
◼ Decrease in equity
◼ Purchase of treasury stock
◼ Payment of dividends on common stock
◼ Net cash provided by (used in) financing activities
◼
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Cash Flow Statement
◼ For each item listed on the Cash Flow
Statement, ask yourself:
◼ How does this transaction affect my cash?
◼ Change in assets have the opposite effect
on cash
◼ Change in liabilities have the same effect
on cash
◼ Change in equity has the same effect on
cash
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Cash Flow Statement
◼ Assets:
◼ Increase in assets → decrease in cash
◼ Decrease in assets → increase in cash
◼ Change in assets → opposite effect on cash
◼ Examples:
◼ Increase in inventory → decrease in cash
◼ Decrease in inventory →increase in cash
◼ Increase in ST investment → decrease in cash
◼ Decrease in Accts. Rec. → increase in cash
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Cash Flow Statement
Liabilities:
◼ Increase in liabilities → increase in cash
◼ Decrease in liabilities → decrease in cash
◼ Change in liabilities → same effect on cash
◼ Examples:
◼ Increase in ST notes pay → increase in cash
◼ Decrease in Accts Pay → decrease in cash
◼ Increase in ST bonds pay → increase in cash
◼ Decrease in wages pay → decrease in cash
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Cash Flow Statement
Equity:
◼ Increase in equity → increase in cash
◼ Decrease in equity → decrease in cash
◼ Change in equity → same effect on cash
◼ Examples:
◼ Issuance/sale of common or preferred stock
(increase in equity)→ increase in cash
◼ Purchase of treasury stock (decrease of common
stock)→ decrease in cash
◼ Payment of dividends (decrease of retained
earnings & equity) → decrease in cash
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CFS Summary:
◼ Operating Activities – increase/decrease in
◼ ST Assets – opposite effect on cash
◼ ST Liabilities – same effect on cash
◼ Investing Activities – increase/decrease in
◼ LT Assets – opposite effect on cash
◼ Financing Activities – increase/decrease in
◼ LT Liabilities – same effect on cash
◼ Equity – same effect on cash
◼ See example on p. 335 – indirect method
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L O 11
Interpreting the Statement
of Cash Flows
A business entity should have positive cash flows
from Operating Activities. If operating activities do
not generate cash, the entity must look to outside
parties for funds to meet its day-to-day activities.
This could include selling off assets (Investing
Activities) or issuing new debt or issuing new
stock (Financing Activities) to obtain cash to pay
for day to day activities of the organization.
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End of Chapter 9
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