《principles of accounting》hhtfa10_ch12_student_ppt.pptx

Prepared byCoby HarmonUniversity of California, Santa BarbaraWestmont CollegeCopyright ?2015 Pearson Education Inc. All rights reserved. Learning ObjectiveIdentify the purposes of the statement of cash flowsCopyright ?2015 Pearson Education Inc. All rights reserved. IDENTIFY THE PURPOSES OF THE STATEMENT OF CASH FLOWSStatement of cash flowsReports cash flowsCash receiptsCash paymentsCovers a span of time (month, quarter, year)Includes cash equivalentsLO 1Copyright ?2015 Pearson Education Inc. All rights reserved. IDENTIFY THE PURPOSES OF THE STATEMENT OF CASH FLOWSServes these purposes:Predicts future cash flowsEvaluates management decisionsDetermines ability to pay dividends and interestShows relationship of net income to cash flowsLO 1Copyright ?2015 Pearson Education Inc. All rights reserved. Timing of the Financial StatementsExhibit 12-1LO 1Copyright ?2015 Pearson Education Inc. All rights reserved. Learning ObjectiveDistinguish among operating, investing, and financing activitiesCopyright ?2015 Pearson Education Inc. All rights reserved. DISTINGUISH AMONG OPERATING, INVESTING, AND FINANCING ACTIVITIESThree types of business activities:OperatingCreate revenue, expenses, gains and losses—net incomeInvestingCash flows related to long-term assetsCash flows related to long-term liabilities and owners’ equityFinancingLO 2Copyright ?2015 Pearson Education Inc. All rights reserved. DISTINGUISH AMONG OPERATING, INVESTING, AND FINANCING ACTIVITIESExhibit 12-2 | How Operating, Investing, and Financing Activities Affect the Balance SheetLO 2Copyright ?2015 Pearson Education Inc. All rights reserved. Two Formats for Operating ActivitiesReconciles from net income to net cash provided by operating activitiesIndirectReports all cash receipts and cash payments from operating activitiesDirectLO 2Copyright ?2015 Pearson Education Inc. All rights reserved. Learning ObjectivePrepare a statement of cash flows by the indirect methodCopyright ?2015 Pearson Education Inc. All rights re