b Statement of Cash Flows For the Year Ended December 31, 2019 Cash flow from operating activities: Cash received from customers Cash flow from investing actvities: Cash flow from financing activities: S Supporting calculations: 1 Cash received from customers Change in accounts receivable 2 Cash paid for merchandise: Cost of goods sold Change in inventory Change in accounts payable 3 Cash paid for advertising: Advertising expense Change in prepaid advertising 4 Cash paid for interest: Interest expense Change in interest payable 5 Purchase of equipment Ending plant assets Beginning plant assets Sale of land 10
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
I'm able to do the cash flow, but I am confused about the cash received from customers part of this. I am also confused about the right side of the attached spreadsheet with supporting calculations:
North Company’s income statement and comparative balance sheets as of December 31 of 2019 and 2018 follow:
| NORTH COMPANY Income Statement For the Year Ended December 31, 2019 |
||
|---|---|---|
| Sales Revenue | $770,000 | |
| Cost of Goods Sold | $550,000 | |
| Wages Expense | 195,000 | |
| Advertising Expense | 31,000 | |
| 24,000 | ||
| Interest Expense | 20,000 | |
| Gain on Sale of Land | (25,000) | 795,000 |
| Net Loss |
$(25,000) |
| NORTH COMPANY Balance Sheets |
||
|---|---|---|
| Dec. 31, 2019 | Dec. 31, 2018 | |
| Assets | ||
| Cash | $80,000 | $32,000 |
| Accounts Receivable | 42,000 | 49,000 |
| Inventory | 107,000 | 115,000 |
| Prepaid Advertising | 10,000 | 14,000 |
| Plant Assets | 360,000 | 210,000 |
| (80,000) | (56,000) | |
| Total Assets | $519,000 | $364,000 |
| Liabilities and |
||
| Accounts Payable | $19,000 | $25,000 |
| Interest Payable | 6,000 | - |
| Bonds Payable | 210,000 | - |
| Common Stock | 245,000 | 245,000 |
| 69,000 | 94,000 | |
| (30,000) | - | |
| Total Liabilities and Stockholders’ Equity | $519,000 | $364,000 |
During 2019, North sold land for $70,000 cash that had originally cost $45,000. North also purchased equipment for cash, acquired treasury stock for cash, and issued bonds payable for cash. Accounts payable relate to merchandise purchases.
Required
a. Calculate the change in cash that occurred during 2019.
b. Prepare a statement of cash flows using the indirect method.
Please see the attached spreadsheets below. I'm unsure how to do the "Cash received from customers" part of the cash flow.
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