Topic 11 statement of cash flows PDF

TOPIC 11 STATEMENT OF CASH FLOWS Topic 11 Learning Objectives On completion of this topic, you should be able to: Indicate the main purpose of the statement of cash flows Distinguish among operating, investing and financing activities Prepare a statement of cash flows using the direct method Explain the indirect method PURPOSE OF THE STATEMENT OF CASH FLOWS  To provide information about:  cash receipts  cash payments  net change in cash resulting from operating, investing and financing activities   To reconcile the beginning and ending cash balances The statement of cash flows provides answers as to:  Where did the cash come from during    the period? What was the cash used for during the period? What was the change in the cash balance during the period? Is the entity generating sufficient cash flows from operations to meet cash| requirements? CLASSIFICATION OF CASH FLOW ACTIVITIES | PREPARING A STATEMENT OF CASH FLOWS - DIRECT Information to prepare the SCF comes from: Statement of financial position (current and prior period) Current statement of profit or loss Additional information | PREPARING A STATEMENT OF CASH FLOWS - DIRECT Flight Central Ltd Income Statement For the year ended 30 June 2018 Flight Central Ltd Balance Sheet As at 30 June 2018 2018 ('000s) Sales Revenue Less Cost of Sales Gross Profit Less Expenses Depreciation expense Insurance expense Salaries & Wages expense General selling & administrative expenses NET PROFIT Additional Information *Note: Amount paid off loan (in thousands) $945 280 $665 70 26 175 122 $60 393 $272 ASSETS Current Cash Accounts Receivable Inventory Prepaid Insurance Total Current Assets Noncurrent Assets Property Plant and Equipment Less Accumulated Depreciation Total Noncurrent Assets TOTAL ASSETS 2018 2017 ('000s) ('000s) $60 180 124 16 $380 $70 195 90 $360 1360 (160) $1,200 $1,580 700 (90) $610 $970 LIABILITIES Current Liabilities Accounts Payable Salaries Payable Other Payables Total Current Liabilities 90 17 18 $125 75 14 20 $109 Noncurrent Liabilities Long-term Loan* TOTAL LIABILITIES 500 $625 430 $539 $955 $431 700 255 $955 326 105 $431 NET ASSETS SHAREHOLDERS' EQUITY Share Capital Retained earnings TOTAL SHAREHOLDERS' EQUITY -10 -15 34 11     Flight Central Ltd Statement of Cash Flows For the Year ended 30 June 2018 Cash Flows from Operations Cash received from customers Cash paid to suppliers Cash paid to employees Cash paid to others Cash paid for insurance Net Cash flows from operating activities $960 (299) (172) (124) (37) $328 Cash Flows from Investing 660  Cash paid for equipment Net Cash Flows from investing activities (660) (660) Cash Flows from Financing Proceeds from loan Repayments of long-term loan Proceeds from share issue 15  Dividends paid  Net Cash Flows from financing activities 2 Net Decrease in cash Opening cash balance Closing cash balance 70  130 (60) 374 (122) 322 (10) 70 60 374  150  | PREPARING A STATEMENT OF CASH FLOWS - DIRECT     Flight Central Ltd Statement of Cash Flows For the Year ended 30 June 2018 Cash Flows from Operations Cash received from customers Cash paid to suppliers Cash paid to employees Cash paid to others Cash paid for insurance Net Cash flows from operating activities SALES REVENUE + BEGINNING Accounts Receivable – ENDING Accounts Receivable OR $960 (299) (172) (124) (37) $328 Cash Receipts from Customers + decrease in AR or – increase in AR calculate cash flows from operations CALCULATING CASH RECEIPTS FROM CUSTOMERS | PREPARING A STATEMENT OF CASH FLOWS - DIRECT Flight Central Ltd Income Statement For the year ended 30 June 2018 Flight Central Ltd Balance Sheet As at 30 June 2018 2018 ('000s) Sales Revenue Less Cost of Sales Gross Profit $945 280 $665 Less Expenses ASSETS Current Cash Accounts Receivable Inventory Prepaid Insurance 2018 2017 ('000s) ('000s) $60 180 124 16 $70 195 90 -10 -15 34 11     Flight Central Ltd Statement of Cash Flows For the Year ended 30 June 2018 Cash Flows from Operations Cash received from customers Cash paid to suppliers Cash paid to employees Cash paid to others Cash paid for insurance Net Cash flows from operating activities Net sales $960 (299) (172) (124) (37) $328 $945 000 Add: Beginning accounts receivable 195 000 Total cash collectable from customers 140 000 Less: Ending accounts receivable (180 000) Cash receipts from customers $960 000 Accounts Receivable Opening Bal 195 000 Cash 960 000 Sales 945 000 Closing Bal 180 000 140 000 140 000 calculate cash flows from operations | CALCULATING CASH RECEIPTS FROM CUSTOMERS PREPARING A STATEMENT OF CASH FLOWS - DIRECT     Accrual Basis Cost of Sales (COS)* Flight Central Ltd Statement of Cash Flows For the Year ended 30 June 2018 Cash Flows from Operations Cash received from customers Cash paid to suppliers Cash paid to employees Cash paid to others Cash paid for insurance Net Cash flows from operating activities BEGINNING Inventory + ENDING INVENTORY = Accrual Basis Purchases + BEGINNING Accounting Payable ENDING Accounts Payable $960 (299) (172) (124) (37) $328 = Cash paid to suppliers for purchases calculate cash flows from operations - CALCULATING | CASH PAID TO SUPPLIERS PREPARING A STATEMENT OF CASH FLOWS - DIRECT Flight Central Ltd Income Statement For the year ended 30 June 2018 Flight Central Ltd Balance Sheet As at 30 June 2018 2018 ('000s) Sales Revenue Less Cost of Sales Gross Profit Less Expenses Depreciation expense Insurance expense Salaries & Wages expense General selling & administrative expenses NET PROFIT Additional Information *Note: Amount paid off loan (in thousands) $945 280 $665 70 26 175 122 393 $272 $60 ASSETS Current Cash Accounts Receivable Inventory Prepaid Insurance Total Current Assets Noncurrent Assets Property Plant and Equipment Less Accumulated Depreciation Total Noncurrent Assets TOTAL ASSETS LIABILITIES Current Liabilities Accounts Payable Cost of sales (COS) 2018 2017 ('000s) ('000s) $60 180 124 16 $380 $70 195 90 $360 1360 (160) $1,200 $1,580 700 (90) $610 $970 90 75 -10 -15 34 11 130 (60) 374 (122) $280 000 Add: Ending inventory 124 000 Accrual-basis purchases for the year 314 000 Cash paid to suppliers for purchase (660) (660) Cash Flows from Financing Proceeds from loan Repayments of long-term loan Proceeds from share issue 15  Dividends paid (90 000) Less: Ending accounts payable $960 (299) (172) (124) (37) $328 Cash Flows from Investing 660  Cash paid for equipment Net Cash Flows from investing activities Less: Beginning inventory Add: Beginning accounts payable     Flight Central Ltd Statement of Cash Flows For the Year ended 30 June 2018 Cash Flows from Operations Cash received from customers Cash paid to suppliers Cash paid to employees Cash paid to others Cash paid for insurance Net Cash flows from operating activities 75 000 (90 000) $299 000 | 10 calculate cash flows from operations - CALCULATING CASH PAID TO SUPPLIERS PREPARING A STATEMENT OF CASH FLOWS - DIRECT     Flight Central Ltd Statement of Cash Flows For the Year ended 30 June 2018 Cash Flows from Operations Cash received from customers Cash paid to suppliers Cash paid to employees Cash paid to others Cash paid for insurance Net Cash flows from operating activities Salaries & Wages Expense + BEGINNING Salaries Payable – ENDING Salaries Payable $960 (299) (172) (124) (37) $328 = Cash paid to employees CALCULATE CASH FLOWS FROM OPERATIONS - cash paid to employees & other suppliers of services (Payables) | 11 PREPARING A STATEMENT OF CASH FLOWS - DIRECT Flight Central Ltd Income Statement For the year ended 30 June 2018 Flight Central Ltd Balance Sheet As at 30 June 2018 2018 ('000s) Sales Revenue Less Cost of Sales Gross Profit Less Expenses Depreciation expense Insurance expense Salaries & Wages expense General selling & administrative expenses NET PROFIT Additional Information *Note: Amount paid off loan (in thousands) $945 280 $665 70 26 175 122 $60 393 $272 ASSETS Current Cash Accounts Receivable Inventory Prepaid Insurance Total Current Assets Noncurrent Assets Property Plant and Equipment Less Accumulated Depreciation Total Noncurrent Assets TOTAL ASSETS LIABILITIES Current Liabilities Accounts Payable Salaries Payable Other Payables 2018 2017 ('000s) ('000s) $60 180 124 16 $380 $70 195 90 $360 1360 (160) $1,200 $1,580 700 (90) $610 $970 90 17 18 75 14 20 -10 -15 34 11     Flight Central Ltd Statement of Cash Flows For the Year ended 30 June 2018 Cash Flows from Operations Cash received from customers Cash paid to suppliers Cash paid to employees Cash paid to others Cash paid for insurance Net Cash flows from operating activities $960 (299) (172) (124) (37) $328 Cash Flows from Investing 660  Cash paid for equipment Net Cash Flows from investing activities (660) (660) Cash Flows from Financing Proceeds from loan Repayments of long-term loan Proceeds from share issue 15  Dividends paid  Net Cash Flows from financing activities 2 Salaries & wages Expense Add: Beginning salaries payable Less: Ending salaries payable Cash paid to employees 130 (60) 374 (122) 322 $175 000 14 000 (17 000) $172 000 | 12 PREPARING A STATEMENT OF CASH FLOWS - DIRECT     Flight Central Ltd Statement of Cash Flows For the Year ended 30 June 2018 Cash Flows from Operations Cash received from customers Cash paid to suppliers Cash paid to employees Cash paid to others Cash paid for insurance Net Cash flows from operating activities Other Expenses + BEGINNING Other payables– ENDING Other Payables $960 (299) (172) (124) (37) $328 = Cash paid to other suppliers CALCULATE CASH FLOWS FROM OPERATIONS - cash paid to employees & other suppliers of services (Payables) | 13 PREPARING A STATEMENT OF CASH FLOWS - DIRECT Flight Central Ltd Income Statement For the year ended 30 June 2018 Flight Central Ltd Balance Sheet As at 30 June 2018 2018 ('000s) Sales Revenue Less Cost of Sales Gross Profit Less Expenses Depreciation expense Insurance expense Salaries & Wages expense General selling & administrative expenses NET PROFIT Additional Information *Note: Amount paid off loan (in thousands) $945 280 $665 70 26 175 122 $60 393 $272 ASSETS Current Cash Accounts Receivable Inventory Prepaid Insurance Total Current Assets Noncurrent Assets Property Plant and Equipment Less Accumulated Depreciation Total Noncurrent Assets TOTAL ASSETS LIABILITIES Current Liabilities Accounts Payable Salaries Payable Other Payables Total Current Liabilities 2018 2017 ('000s) ('000s) $60 180 124 16 $380 $70 195 90 $360 1360 (160) $1,200 $1,580 700 (90) $610 $970 90 17 18 $125 75 14 20 $109 -10 -15 34 11     Flight Central Ltd Statement of Cash Flows For the Year ended 30 June 2018 Cash Flows from Operations Cash received from customers Cash paid to suppliers Cash paid to employees Cash paid to others Cash paid for insurance Net Cash flows from operating activities $960 (299) (172) (124) (37) $328 Cash Flows from Investing 660  Cash paid for equipment Net Cash Flows from investing activities (660) (660) Cash Flows from Financing Proceeds from loan Repayments of long-term loan Proceeds from share issue 15  Dividends paid  Net Cash Flows from financing activities 2 Net Decrease in cash Other Expenses Add: Beginning other payables Less: End other payables Cash paid to other suppliers 130 (60) 374 (122) 322 (10) $122 000 20 000 (18 000) $124 000 | 14 PREPARING A STATEMENT OF CASH FLOWS - DIRECT     Flight Central Ltd Statement of Cash Flows For the Year ended 30 June 2018 Cash Flows from Operations Cash received from customers Cash paid to suppliers Cash paid to employees Cash paid to others Cash paid for insurance Net Cash flows from operating activities Expense for service (e.g Insurance) - BEGINNING Prepaid expense + ENDING Prepaid expense $960 (299) (172) (124) (37) $328 = Cash paid for service CALCULATE CASH FLOWS FROM OPERATIONS - cash paid to other suppliers | 15 of services (prepayments) PREPARING A STATEMENT OF CASH FLOWS - DIRECT Flight Central Ltd Income Statement For the year ended 30 June 2018 Flight Central Ltd Balance Sheet As at 30 June 2018 2018 ('000s) Sales Revenue Less Cost of Sales Gross Profit Less Expenses Depreciation expense Insurance expense Salaries & Wages expense General selling & administrative expenses NET PROFIT $945 280 $665 70 26 175 122 393 $272 ASSETS Current Cash Accounts Receivable Inventory Prepaid Insurance Total Current Assets Noncurrent Assets Property Plant and Equipment Less Accumulated Depreciation Total Noncurrent Assets 2018 2017 ('000s) ('000s) $60 180 124 16 $380 $70 195 90 $360 1360 (160) $1,200 700 (90) $610 -10 -15 34 11     Flight Central Ltd Statement of Cash Flows For the Year ended 30 June 2018 Cash Flows from Operations Cash received from customers Cash paid to suppliers Cash paid to employees Cash paid to others Cash paid for insurance Net Cash flows from operating activities $960 (299) (172) (124) (37) $328 Cash Flows from Investing 660  Cash paid for equipment Net Cash Flows from investing activities Insurance Expense (660) (660) $26 000 Less: Beginning prepayments (5 000) Add: End prepayments 16 000 Cash paid to insurance supplier $37 000 | 16 PREPARING A STATEMENT OF CASH FLOWS - DIRECT Noncurrent Assets Property Plant and Equipment Less Accumulated Depreciation Total Noncurrent Assets TOTAL ASSETS 1360 (160) $1,200 $1,580 700 (90) $610 $970 Cash Flows from Investing 660  Cash paid for equipment Net Cash Flows from investing activities (660) (660) Cash Flows from Financing Acquisition and disposal of noncurrent Assets  Amounts paid for new assets  Proceeds received for assets sold  Eliminate effect of non-cash transactions  Depreciation  Gains/losses on disposal Receipts from investments | 17 PREPARING A STATEMENT OF CASH FLOWS - DIRECT NET PROFIT $272 Total Noncurrent Assets TOTAL ASSETS $1,200 $1,580 $610 $970 LIABILITIES Current Liabilities Accounts Payable Salaries Payable Other Payables Total Current Liabilities 90 17 18 $125 75 14 20 $109 Noncurrent Liabilities Long-term Loan* TOTAL LIABILITIES 500 $625 430 $539 $955 $431 700 255 $955 326 105 $431 NET ASSETS SHAREHOLDERS' EQUITY Share Capital Retained earnings TOTAL SHAREHOLDERS' EQUITY Cash Flows from Financing Proceeds from loan Proceeds from share issue Dividends paid 15  Net Cash Flows from financing activities 3  Net Decrease in cash Opening cash balance Closing cash balance 70 374 (122) 322 (10) 70 60 70  374  150  Analyse changes in:  Non-current liabilities  Equity Determine cash transactions  Inflows  Outflows | 18 EXAMPLE STATEMENT OF CASH FLOWS Flight Central Ltd Income Statement For the year ended 30 June 2018 Flight Central Ltd Balance Sheet As at 30 June 2018 2018 ('000s) Sales Revenue Less Cost of Sales Gross Profit Less Expenses Depreciation expense Insurance expense Salaries & Wages expense General selling & administrative expenses NET PROFIT $945 280 $665 70 26 175 122 393 $272 ASSETS Current Cash Accounts Receivable Inventory Prepaid Insurance Total Current Assets Noncurrent Assets Property Plant and Equipment Less Accumulated Depreciation Total Noncurrent Assets TOTAL ASSETS 2018 2017 ('000s) ('000s) $60 180 124 16 $380 $70 195 90 $360 1360 (160) $1,200 $1,580 700 (90) $610 $970 LIABILITIES Current Liabilities Accounts Payable Salaries Payable Other Payables Total Current Liabilities 90 17 18 $125 75 14 20 $109 Noncurrent Liabilities Long-term Loan* TOTAL LIABILITIES 500 $625 430 $539 $955 $431 700 255 $955 326 105 $431 NET ASSETS SHAREHOLDERS' EQUITY Share Capital Retained earnings TOTAL SHAREHOLDERS' EQUITY -10 -15 34 11     Flight Central Ltd Statement of Cash Flows For the Year ended 30 June 2018 Cash Flows from Operations Cash received from customers Cash paid to suppliers Cash paid to employees Cash paid to others Cash paid for insurance Net Cash flows from operating activities $960 (299) (172) (124) (37) $328 Cash Flows from Investing 660  Cash paid for equipment Net Cash Flows from investing activities (660) (660) Cash Flows from Financing Proceeds from loan Proceeds from share issue Dividends paid 15  Net Cash Flows from financing activities 3  Net Decrease in cash Opening cash balance Closing cash balance 70 374 (122) 322 (10) 70 60 70  374  150  | 19 FORMAT OF THE STATEMENT OF CASH FLOWS – Indirect Method Under the INDIRECT method the accrual based profit figure is adjusted to get the cash flow from operations by adding or subtracting:  adjustments to remove accruals for non-cash expenses or revenues arising from noncurrent asset changes such as depreciation expense and profit or loss on the sale of noncurrent assets;  adjustments to remove accruals from uncollected revenues, revenues received in advance, prepaid expenses and unpaid expenses represented by changes in non-cash working capital accounts Indirect Method of Reporting Cash Flows from Operations Net Profit $272 Add Depreciation 70 Increase in wages payable Increase in accounts payable 15 Decrease in accounts receivable 15 Deduct Increase in inventory (34) Increase in prepaid insurance (11) Decrease in other payables (2) Cash flows from operations $328 | 20 Topic 11 Learning Objectives On completion of this topic, you should be able to: Indicate the main purpose of the statement of cash flows Distinguish among operating, investing and financing activities Prepare a statement of cash flows using the direct method Explain the indirect method ... activities Prepare a statement of cash flows using the direct method Explain the indirect method PURPOSE OF THE STATEMENT OF CASH FLOWS  To provide information about:  cash receipts  cash payments... 34 11     Flight Central Ltd Statement of Cash Flows For the Year ended 30 June 2018 Cash Flows from Operations Cash received from customers Cash paid to suppliers Cash paid to employees Cash. .. cash flows from operations | CALCULATING CASH RECEIPTS FROM CUSTOMERS PREPARING A STATEMENT OF CASH FLOWS - DIRECT     Accrual Basis Cost of Sales (COS)* Flight Central Ltd Statement of Cash