Statement of Cash Flows-Indirect Method

Cash flow from operating activities

Net Income
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation
Amortization of Intangibles
Depletion
Add Losses-Realized/Unrealized
Deduct Gains Realized/Unrealized
Change In Inventory
Change in Accounts Receivable/Gross vs Net as affected by Allowance
Change In Prepaid Assets/Expenses
Change in Accounts Payable
Change in Accrued Liabilities
Change in Unearned Revenue
Impact of Equity Method
Impact of Bond Amortization on Interest Expense
Impact of Bond Amortization on Interest Revenue
Change in Deferred Income Taxes

Net cash provided/used by Operating Activities

Cash flows from Investing Activities

Purchase/sale of land
Purchase/sale of equipment
Purchase/Sale of Investments
Loans to other companies/Repayments by other companies

Net cash provided/used by Investing Activities

Cash flows from Financing Activities

Purchase/Sale (Treasury Stock)
Sale of Stock-Preferred/Common
Proceeds from Bond Issuance
Redeemption of Bonds
Payment of dividends to shareholders
LOAN REPAYMENTS/BORROWED
Net cash provided/used by Financing Activities

Net increase/decrease in cash

Cash at beginning of period
Cash at end of period

Note: Interest revenue, interest expense and dividends as revenue are

part of operating activities. Payments of dividends to shareholders are part of
financing activities. Principal payments on debt are part of financing.
Direct Method: Referred to as the Income Statement Approach

This method is for use in the operating section of the Statement of Cash Flows

This method reports net cash flow from operating activities as major classes of cash receipts
and cash disbursements.

Cash Receipts
Cash Collected from Customers = Sales Revenue + Decrease in AR or - Increase in AR
+ Increase in Unearned Revenue or
- Decrease in Unearned Revenue

Cash received from Interest and Dividends

Cash Disbursements: Cash Paid to Suppliers = Cost of Goods Sold + Increase in Inventory
or - Decrease in Inventory
+ Decrease in Accounts Payable or
- Increase in Accounts Payable

Cash Paid for Operating Expenses = Operating Expenses + Increase

in Prepaid Expenses or - Decr
in Prepaid Expenses.
+Decrease in Accrued Expense
Payable or - Increase in Accrue
Expenses Payable

You will still consider depreciation, amortization, depletion