Concept explainers
Statement of cash flows: It is one of the financial statement that shows the cash and cash equivalents of a company for a particular period. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financing activities of a company.
Direct method: The direct method uses the cash basis of accounting for the preparation of the statement of cash flows. It takes into account those revenues and expenses for which cash is either received or paid.
Cash flows from operating activities: Cash flows from operating activity represent the net cash flows from the general operation of the business by comparing the cash receipt and cash payments.
The below table shows the way of calculation of cash flows from operating activities:
Cash flows from operating activities (Direct method) |
Add: Cash receipts. |
Cash receipt from customer |
Less: Cash payments: |
To supplier |
For operating expenses |
Income tax expenses |
Net cash provided from or used by operating activities |
To Prepare: Operating activities section of statement of cash flow under direct method.
Want to see the full answer?
Check out a sample textbook solutionChapter 14 Solutions
Horngren's Financial & Managerial Accounting, Student Value Edition (5th Edition)
- Blue Company, an architectural firm, has a bookkeeper who maintains a cash receipts and disbursements journal. At the end of the year (2019), the com-pany hires you to convert the cash receipts and disbursements into accrual basis revenues and expenses. The total cash receipts are summarized as follows. Cash sales                            $150,000 Collections on accounts receivable           350,000 Bank loan                                90,000 Total cash receipts                    $590,000 The accounts receivable from customers at the end of the year are $120,000. You note that the accounts receivable at the beginning of the year were $190,000. The cash sales included $30,000 of prepayments for services to be provided over the period January 1, 2019, through December 31, 2021. a.Compute the company’s accrual basis gross income for 2019. b.Would you recommend that Blue use the cash method or the…arrow_forwardThe following information has been presented to you for 2018 by Wonder Projects Limited:   September October November  Rand Rand Rand Cash revenue 200 000 220 000 240 000 Credit revenue 120 000 180 000 190 000 Purchases (all credit) 130 000 140 000 120 000  Additional information: Collection of credit revenue: 50% in the month of invoice 30% one month after invoice 15% two months after invoice and the balance written off as irrecoverable. Purchases are on credit and are paid for one month after the purchase, less 5% Rent income amounts to R10 000 per The rent will increase by 8% on 1 October 2018. A fixed deposit of R150 000 will mature on 31 October 2018. Interest of R15 000 will also be received on this A new computer will be purchased on 3 September 2018 for R25 000 Salaries amount to R20 000 per A 10% increase will take effect on 1 October 2018. The owner is expected to take R5 000 cash from the business on 20 October…arrow_forwardAdditional data related to the first quarter of 2016for HaneyCompany: (Click the icon to view the data.) Read the requirements. Data table Requirement 1. Prepare Haney Company's schedule of cash receipts from customers and sched Begin by preparing the schedule of cash receipts from customers for the first quarter of 2016. Cash Receipts from Customers Total sales Cash Receipts from Customers: Accounts Receivable balance, December 31, 2015 1st Qtr.-Sales Total cash receipts from customers First Quarter 2016 Total sales $ 210,000 Budgeted purchases of direct materials Budgeted direct labor cost 40,600 36,900 Budgeted manufacturing overhead costs: Variable manufacturing overhead 1,225 Depreciation 1,400 Insurance and property taxes 6,850 Budgeted selling and administrative expenses: Salaries expense 7,000 Rent expense 1,800 Insurance expense Depreciation expense Supplies expense 1,400 500 10,500 More info Accounts Receivable balance, March 31, 2016: 1st Qtr.-Sales, collected in 2nd Qtr. s…arrow_forward
- Upton Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, ships them to its chain of retail stores, and has a staff to advise customers and help them set up their new computers. Upton's balance sheet as of December 31, 2019, is shown here (millions of dollars): Cash $   3.5  Accounts payable $   9.0 Receivables 26.0  Notes payable 18.0 Inventories 58.0  Line of credit 0  Total current assets $ 87.5  Accruals 8.5 Net fixed assets 35.0   Total current liabilities $ 35.5    Mortgage loan 6.0    Common stock 15.0    Retained earnings 66.0  Total assets $122.5   Total liabilities and equity $122.5 Sales for 2019 were $350 million and net income for the year was $10.5 million, so the firm's profit margin was 3.0%. Upton paid dividends of $4.2 million to common stockholders, so its payout ratio was 40%. Its tax rate was 25%, and it operated at full capacity. Assume that all assets/sales ratios, (spontaneous…arrow_forwardCAN SOMEONE HELP ME SET UP THE DEBIT AND CREDIT?  Timmins Company of Emporia, Kansas, spreads herbicides and applies liquid fertilizer for local farmers. On May 31, 2020, the company’s Cash account per its general ledger showed a balance of $7,402.00.The bank statement from Emporia State Bank on that date showed the following balance. EMPORIA STATE BANK CHECKS AND DEBITS     DEPOSITS AND CREDITS   DAILY BALANCE XXXXXX                     XXXXX           5-31 $ 8,403.20 A comparison of the details on the bank statement with the details in the Cash account revealed the following facts. 1.  The statement included a debit memo of $30 for the printing of additional company checks.  2.  Cash sales of $993.48 on May 12 were deposited in the bank. The cash receipts entry and the deposit slip were incorrectly made for $1,043.48. The bank credited Timmins Company for the correct amount.  3.  Outstanding checks at May 31 totaled $941.35, and…arrow_forwardUpton Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, ships them to its chain of retail stores, and has a staff to advise customers and help them set up their new computers. Upton's balance sheet as of December 31, 2019, is shown here (millions of dollars): Cash $   3.5  Accounts payable $   9.0 Receivables 26.0  Notes payable 18.0 Inventories 58.0  Line of credit 0  Total current assets $ 87.5  Accruals 8.5 Net fixed assets 35.0   Total current liabilities $ 35.5    Mortgage loan 6.0    Common stock 15.0    Retained earnings 66.0  Total assets $122.5   Total liabilities and equity $122.5 Sales for 2019 were $350 million and net income for the year was $10.5 million, so the firm's profit margin was 3.0%. Upton paid dividends of $4.2 million to common stockholders, so its payout ratio was 40%. Its tax rate was 25%, and it operated at full capacity. Assume that all assets/sales ratios, (spontaneous…arrow_forward
- Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:CengageCornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
- Financial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage LearningIndividual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT