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
Instructions for a Cash Flows Statement-Direct Method
MJC Revised 10-2011 Page 2
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/
Instructions for a Cash Flows Statement-Direct Method
MJC Revised 10-2011 Page 3
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.
Instructions for a Cash Flows Statement-Direct Method
MJC Revised 10-2011 Page 4
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.
Instructions for a Cash Flows Statement-Direct Method
MJC Revised 10-2011 Page 5
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.