Statement of
Cash flows from operating activities: These are the cash produced by the normal business operations.
Indirect method: Under this method, the following amounts are to be adjusted from the Net Incometo calculate the net cash provided from operating activities.
The below table shows the way of calculation of cash flows from operating activities:
Cash flows from operating activities (Indirect method) |
Add: Decrease in current assets |
Increase in current liability |
|
Loss on sale of plant assets |
Deduct: Increase in current assets |
Decrease in current liabilities |
Gain on sale of plant assets |
Net cash provided from or used by operating activities |
To Determine: The cash flows from operating activities.
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Chapter 16 Solutions
Bundle: Accounting, Chapters 1-13, 26th + Working Papers, Chapters 1-17 For Warren/reeve/duchac's Accounting, 26th And Financial Accounting, 14th + ... For Warren/reeve/duchac's Accounting, 26th
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- Of the following questions, which one would not be answered by thestatement of cash flows? A. Where did the cash come from during the period? B. What was the cash used for during the period? C. Were all the cash expenditures of benefit to the company during the period? D. What was the change in the cash balance during the period?arrow_forwardThe change in cash for the year can be calculated by comparing the balance of cash reported in this year’s and last year’s balance sheet. Why is the statement of cash flows needed?arrow_forwardA contributor to the difference in Target’s net income and cash flows from operatingactivities and net income in each of the three years presented is a sizable increasein the amount Target owes its suppliers. If Target had used the direct rather thanthe indirect method of reporting operating activities, how would this reduction inaccounts payable have affected cash from operating activities?arrow_forward
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