Instructions for a Cash Flows Statement Direct Method

Instructions for a Cash Flows Statement-Direct Method

MJC Revised 10-2011 Page 1

Love Thy Pets Inc,.

Statement of Cash Flows

For the Year Ended, December 31, 2011

Cash flows from operating activities:

Cash receipts from operating activities $XX,XXX

Cash payments from operating activities (XX,XXX)

Net cash provided by operating activities $XX,XXX

Cash flows from investing activities:

Purchase of equipment (XX,XXX)

Sale of equipment XX,XXX

Purchase of investment (X,XXX)

Sale of investment X,XXX

Net cash used by investing activities XX,XXX

Cash flows from financing activities:

Issuance of common stock XX,XXX

Issuance of note or bonds payable XX,XXX

Payment of dividends (X,XXX)

Redemption of bonds (X,XXX)

Purchase of treasury stock (X,XXX)

Net cash provided by financing activities XX,XXX

Net increase (decrease) in cash X,XXX

Cash at beginning of period XX,XXX

Cash at end of period $XX,XXX



Contents

Operating section of cash flows statement: ................................................................................ 3

Investing section of the cash flows statement: ............................................................................ 4

Financing section of the cash flows statement:........................................................................... 5

End section of the cash flows statement: .................................................................................... 5

For a presentation on the topic of “Cash Flows Statement-Direct Method” go to

this web-link:

http://prezi.com/vopd12nirah2/cash-flows-statement-direct-method/

http://prezi.com/vopd12nirah2/cash-flows-statement-direct-method/



Step-by-Step Instructions

Start with the three-line header, which included the name of the corporation, the title of the

statement, and the period for which the statement is being prepared.

Operating section of cash flows statement:

1. The first line of the body of the statement contains in the left column the section header

“Cash flows from operating activities.”

2. Next, place the title “Cash receipts from operating activities” in the left column. The

dollar amount, which is placed in the middle column, will include all of the cash receipts

from customers during the fiscal period.

The formula:

a. Cash receipts from customers = Revenues from either Sales or Services

Plus Minus

decreases in accounts receivable increases in accounts receivable

3. Now, place the title “Cash payments for operating activities” on the next line. This dollar

amount will include all cash payment made over the fiscal period. There are a number of

formulas used to calculate this dollar amount. Add the results from these formulas to

provide a dollar amount for the statement. This amount will have brackets because the

amount decreases cash flow from operating activities.

The Formulas:

a. Cash Payments to Supplies = Cost of Goods Sold

Plus Minus

increase in inventory decrease in inventory

decrease in accounts payable increase in accounts payable

b. Cash payments for operating expenses = Operating expenses

Plus Minus

increase in prepaid expenses decreases in prepaid expenses

decreases in accrued expenses payable increases in accrued expenses

payable

Any depreciation, amortization, or

depletion that was included in the

operating expenses.



c. Cash payments for interest = Interest expense

Plus Minus

decrease in interest payable increase in interest payable

d. Cash payments for income taxes = Income tax expense

Plus Minus

decreases in income taxes payable increases in income taxes payable

4. On the last line of this section, place the title “Net cash provided by operating activities.”

Subtract cash payments from operating activities from cash receipts from operating

activities and place the results in the right column.

Investing section of the cash flows statement:

1. This section starts with the section header “Cash flows from investing activities” placed

in the left column.

2. On the next few lines place the titles for any of these events which occurred during the

fiscal period:

Plus Minus

Sale of equipment Purchase of equipment

Sale of investment Purchase of investment

Place the dollar amounts in the middle column. Any items in the minus column of the

above chart will have brackets surrounding their dollar amounts.

3. Finally, for this section total the entire sales minus all of the purchases to get the results

of this section. Place the title “Net cash provided by investing activities” if the result is

positive or if the result is negative use the title “Net cash used by investing activities.”

The resulting dollar amount is place in the right column.



Financing section of the cash flows statement:

1. Start this section with the header “Cash flows from financing activities” in the left

column.

2. Place any of these item titles in this section if the events occurred during the fiscal period.

Plus Minus

Sale of stock Purchase of Treasury Stock

Sale of bonds or notes Redemption of bonds or notes

Payment of dividends

3. Finally, for this section total all of the sales minus all of the purchases, redemptions, and

payments to get the results of this section. Use the title “Net cash provided by financing

activities” if the result is positive or if the result is negative use the title “Net cash used by

financing activities.” Place the title in the left column. The resulting dollar amount is

place in the right column.

End section of the cash flows statement:

1. Start this section by placing the title “Net increase (decrease) in cash” in the left column.

Total the results from the right column, which includes dollar amounts from operating

activities, investing activities and financing activities.

2. Now place the title “Cash at the beginning of the period” in the left column. This dollar

amount comes from the balance sheet at the end of the prior year.

3. Finally, either add (positive dollar amount) or subtract (negative amount) from the

beginning of the period cash to get cash at end for the period. Place the title “Cash at end

of period” in the left column.

Documents

Instructions for a Cash Flows Statement Direct Method