CHAPTER SIX APPENDIX

1. CHAPTER SIX APPENDIX STATEMENT OF CASH FLOWS

2. STATEMENT OF CASH FLOWS • Fourth financial statement • Explains... • what the business did to generate cash and • how the cash was used • Categorizes all cash transactions into three types: • Operating, Investing, and Financing

3. OPERATING ACTIVITIES • Related to the revenues and expenses reported on the Income Statement • Examples: • Cash received from customers • Cash paid for wages • Cash paid for rent • Cash paid for insurance

4. INVESTING ACTIVITIES • Those transactions involving the purchase and sale of long-term assets, lending money, and collecting the principal of the related loans • Examples: • Cash paid to purchase equipment • Cash received from sale of old equipment

5. FINANCING ACTIVITIES • Those transactions dealing with the exchange of cash between the business and its owners and creditors • Examples: • Investment of cash by owner • Owner’s withdrawals • Cash paid to repay principal on a loan

6. ANALYSIS OF TRANSACTIONS CASH Amt. Class. Event Amt. Event Class. Invst. by Jessica Financing 2,000 This is a transaction with the owner…… FINANCING ACTIVITY

7. ANALYSIS OF TRANSACTIONS CASH Amt. Class. Event Amt. Class. Event 1,200 Invest. by Jessica Financing 2,000 Investing Purch. Del. Eq. This is a transaction involving long-term assets…… INVESTING ACTIVITY

8. ANALYSIS OF TRANSACTIONS CASH Amt. Class. Event Amt. Event Class. 1,200 Invest. by Jessica Financing 2,000 Investing Purch. Del. Eq. 300 Made loan pmt Financing This transaction involves a creditor…… FINANCING ACTIVITY

9. ANALYSIS OF TRANSACTIONS CASH Amt. Class. Event Amt. Event Class. 1,200 Invest. by Jessica Financing 2,000 Investing Purch. Del. Eq. Operating 500 300 Made loan pmt. Rec’d for services Financing This transaction involves an expense….. OPERATING ACTIVITY

10. ANALYSIS OF TRANSACTIONS CASH Amt. Class. Event Amt. Event Class. 1,200 Invest. by Jessica Financing 2,000 Investing Purch. Del. Eq. Operating 500 300 Made loan pmt. Rec’d for services Financing The remaining transactions are categorized in the same manner

11. ANALYSIS OF TRANSACTIONS CASH Amt Class. Event Amt Event Class. 1,200 Invest. by Jessica Financing 2,000 Investing Purch. Del. Eq. Rec’d for services 300 Made loan pmt. 500 Operating Financing Rec’d for services Operating 200 570 Operating Paid office rent Rec’d for services Operating 50 Paid tele. bill 430 Operating 80 Purch. supplies Operating 3,500 From this analysis we can prepare a Statement of Cash Flows. 200 Operating Pd. for insurance Investing Purch. Del. Equip 300 650 Operating Paid wages Withdrawal 150 Financing 3,130 Bal. 370

12. Jessica Jane’s Campus DeliveryStatement of Cash FlowsFor Month Ended June 30, 20-- Cash flow from operating activities: Operating Activities are shown first.

13. Cash flow from operating activities: $1,500 Cash received from customers for services First item listed is the “inflow” of cash from customers.

14. Cash flow from operating activities: Cash received from customers for services $1,500 Cash paid for wages $ (650) Cash paid for rent (200) Cash paid for supplies (80) Cash paid for telephone (50) Cash paid for insurance (200) Next the “outflows” of cash are listed. “( )” are used to indicate the negative effect on the cash flow.

15. Cash flow from operating activities: Cash received from customers for services $1,500 Cash paid for wages $ (650) (200) Cash paid for rent (80) Cash paid for supplies Cash paid for telephone (50) Cash paid for insurance (200) (1,180) Total cash paid for operations Net cash provided by operating activities $320 Since operating activities are the main purpose of the business, it is important to be able to generate positive cash flows from operating activities.

16. Cash flow from operating activities: Cash received from customers for services $1,500 Cash paid for wages $ (650) (200) Cash paid for rent (80) Cash paid for supplies (50) Cash paid for telephone Cash paid for insurance (200) Total cash paid for operations (1,180) Net cash provided by operating activities $320 Cash flows from investing activities: Investing activities are shown next.

17. Cash flow from operating activities: Cash received from customers for services $1,500 $ (650) Cash paid for wages (200) Cash paid for rent Cash paid for supplies (80) Cash paid for telephone (50) Cash paid for insurance (200) Total cash paid for operations (1,180) Net cash provided by operating activities $ 320 Cash flows from investing activities: $ (1,500) Cash paid for delivery equipment (1,500) Net cash used for investing activities Cash flows from financing activities: Financing activities are shown last.

18. Cash flow from operating activities: Cash received from customers for services $1,500 $ (650) Cash paid for wages Cash paid for rent (200) (80) Cash paid for supplies (50) Cash paid for telephone Cash paid for insurance (200) Total cash paid for operations Net cash provided by operating activities (1,180) Cash flows from investing activities: $ 320 Cash paid for delivery equipment Net cash used for investing activities $ (1,500) Cash flows from financing activities: (1,500) Cash investment by owner 2,000 Cash withdrawal by owner (150) Payment made on loan (300) Net cash provided by financing activities 1,550

19. Cash flow from operating activities: Cash received from customers for services $1,500 $ (650) Cash paid for wages The sum of the inflows and outflows from operating, investing, and financing activities equals the change in the cash account balance this period. Beg. balance $0  Ending balance $370 INCREASE of $370 Cash paid for rent (200) (80) Cash paid for supplies (50) Cash paid for telephone Cash paid for insurance (200) Total cash paid for operations (1,180) Net cash provided by operating activities Cash flows from investing activities: $ 320 Cash paid for delivery equipment Net cash used for investing activities $ (1,500) (1,500) Cash flows from financing activities: Cash investment by owner 2000 Cash withdrawal by owner (150) Payment made on loan (300) Net cash provided by financing activities 1,550 Net increase in cash $370