Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

13. Statement of Cash Flows

Introduction to the Statement of Cash Flows

Financial Accounting

13. Statement of Cash Flows

Introduction to the Statement of Cash Flows

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Which of the following formulas describes the calculation of cash flow from operating activities using the indirect method?

Net Income - Dividends Paid + Proceeds from Issuing Stock

Net Income + Depreciation Expense + Losses - Gains - Increase in Current Assets + Increase in Current Liabilities

Ending Cash Balance - Beginning Cash Balance

Total Revenues - Total Expenses

Previous problemNext problem

Verified step by step guidance

Step 1: Understand the indirect method for calculating cash flow from operating activities. This method starts with net income and adjusts for non-cash items and changes in working capital.

Step 2: Identify non-cash items that need to be added back to net income. For example, depreciation expense is a non-cash charge that reduces net income but does not affect cash flow, so it is added back.

Step 3: Adjust for gains and losses. Gains from the sale of assets are subtracted because they increase net income but do not represent operating cash flow. Losses are added back for the same reason.

Step 4: Account for changes in current assets and liabilities. An increase in current assets (e.g., accounts receivable) reduces cash flow, while an increase in current liabilities (e.g., accounts payable) increases cash flow.

Step 5: Combine all adjustments to net income to arrive at cash flow from operating activities. The formula is: Net Income + Depreciation Expense + Losses - Gains - Increase in Current Assets + Increase in Current Liabilities.