Format Statement of Cash Flows per GAAP Check figures listed: §NET CASH PROVIDED

Question

Format Statement of Cash Flows per GAAP Check figures listed:

§NET CASH PROVIDED BY OPERATING ACTIVITIES = 12,408.04 §NET CASH USED IN INVESTING ACTIVITIES = -6,637.50 §NET CASH PROVIDED BY FINANCING ACTIVITIES = 23,811.81 §NET INCREASE IN CASH: 4,766.27 OPERATING ACTIVITIES Net Income -14,754.87

OPERATING ACTIVITIES Net Income -14,736.92 Adjustments to reconcile Net Income to net cash provided by operations: 1200 · Accounts Receivable -2,969.25 1300 · *Inventory Asset -1,130.77 1350 · Prepaid Insurance -705.00 1900 · Security Deposit -1,000.00 2000 · Accounts Payable 160.00 2050 · Credit Card Payable 617.02 2010 · Interest Payable 71.23 2100 · 401k Payable 138.36 2110 · FICA Payable 529.20 2125 · Wages Payable 178.00 2130 · FUTA PAYABLE 92.71 2140 · Health Insurance Payable 1,740.00 2160 · SUTA PAYABLE 141.83 2170 · SWT Withholding 67.80 Net cash provided by Operating Activities -16,805.79 INVESTING ACTIVITIES 1325 · Office Supplies -69.00 1500 · Lawn and Landscaping Equipment -4,500.00 1600 · Leasehold Improvement -850.00 1700 · Office Equipment -787.50 17000 · Accumulated Depreciation 4,249.00 1800 · Truck -18,200.00 1850 · Truck with Snow Plow -20,000.00 Net cash provided by Investing Activities -40,157.50 FINANCING ACTIVITIES 2180 · Notes Payable 15,375.10 3000 · Rushing Capital 58,200.00 2190 · Current Long-Term Liability 3,550.23 3100 · Rushing Draw -15,613.52 Net cash provided by Financing Activities 61,511.81 Net cash increase for period 4,548.52 Cash at end of period 4,548.52

Explanation / Answer

Cash flow indicates sources from which cash are flowing in or are utilized during the year. Three sources are-

1. Cash flow from operating activity: It is cash flow from net revenue or loss from trading activities of the concern. The net revenue/loss does not indicate cash inflows or outflows. Many non cash items are included there. Also some cash flow items are excluded there. So adjustments are needed. Here three adjustments are made-

a. Increase in current assets will mean cash has been injected in working capital. So it will decrease cash inflow.

b. Also current liability increases cash inflow since it requires less cash to repay liabilities.

c. Depreciation does not result in cash outflow. So it is added with operating cash flow. It is not related with investing activity.

2. Investing activity will mean purchase or sale of long tem assets. Here purchase of capital assets have caused cash outflows.

3. Last source is financing activities. Issue of new shares or taking of new long term loan will create cash inflow. Further any repayment will create cash outflow.

On the basis of above analysis, following cash flow statement has been prepared

Statement of cash flow   Amount Amount Net loss from Revenue statement -14,736.92 Adjustment to reconcile et income to get net cash provided by operation 1. Increase in curret assets: 1200 accounts receivables 2,969.25 1300 Inventory 1130.77 1350 Prepaid Insurance 705 1900 Security deposits 1,000 5,805.02 2. Decrease in current liabilities: 2000 Increase in A/c payable 160 2050 Credit card payable 617.02 2010 Interest payable 71.23 2100 4D1K payable 138.36 2110 FICA PAYABLE   529.2 2125 Wages payable 178 2130 FUTA payable 92.71 2140 Health Insurance payable 1,740 2160 SUTA payable 141.83 2170 SWT withholding 67.8 3736.15 Add: Depreciation   4249 Net Cash out flow from operating activities -12,556.79 Cash outflow from Investing activities: 1325 Office supplies 69 1500 Lawn and Lansscapig equipment 4500 1600 Leasehold equipment 850 1700 Office equipment 787.5 1800 Truck 18,200 1850 Truck with Snow Plow 20,000 -44406.5 Cash flow from Fiancing activities: Cash inflow due to 2100 Issue of Notes payable 15,375.10 3000 Issue of capital 58,200 2190 Increase in long term liability 3,550.23 Cash outflow from- 3100 Rusty Draw -15,613.52 61,511.81 Total cash flow during the year 4,548.52 Opening cash balance 0 Closing cash balance 4,548.52

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