Hello in this lecture we’re going to talk about creating a statement of cash flows using the indirect method, we will be able to define a statement of cash flows, create a statement of cash flows explain a process of creating a statement of cash flows designed to limit mistakes and define the indirect method. So what we’ll do is we’ll work through basically a problem and look through the statement of cash flows. We want to think about a few things we want to think about how to create a statement of cash flows, we want to think about a few definitions of what is a statement of cash flows, we want to kind of explain what the purpose is of a statement of cash flows and going through the process can help us to do that. Also want to point out that creating the statement of cash flows can help us with setting up a problem in such a way that we can limit the amount of mistakes that we will make. So a statement of cash flows is something that in a lot of firms, people generally often have problems to create the statement of cash flows. And it’s good practice to go in there and and create the statement of cash flows and try to create a system in which it’s easy for us to have checkpoints and see where a problem is going to happen.
In this presentation, we will take a look at the statement of cash flows using the direct method. Here’s going to be our information we got the comparative balance sheet, the income statement and some additional information. And we will use this information to put together our worksheet which will be the primary source used to create the statement of cash flows using the direct method. This is going to be our worksheet. Now most of this worksheet will be similar to what we have done for the indirect method, in that we took the difference in the balance sheet accounts. So we’re taking the current year and the prior year, the current period, the prior period, all the balance sheet accounts, we’ve got cashed down to the retained earnings for the balance sheet accounts. But we’re also in this case going to give us the income statement accounts for the current period. So in other words, we’re going to break out the retained earnings the amount to its component parts, meaning we’ve got net income being broken out on the income statement. We’ve got sales cost of goods sold, the income statement accounts. So it’s going to be our same kind of worksheet here, we’re going to be in balance, we’ve converted it from a plus and minus format, we’ve removed all of the subtitles as we did under the indirect method.
This presentation we will continue on with our statement of cash flows, we’re not going to enter the final adjustments that we will need to finalize the statement of cash flows to bring those last few numbers to the correct balances. In order to do that, we’re going to use this information we’ve got our comparative balance sheet, our income statement and additional information. We put together most of our information so far with the comparative balance sheet, which we made into a worksheet. Now we’re going to use some of these other resources, the income statement, the additional resources to make those final adjustments, those fine tunings that are needed to get those few numbers that we have left and noted into balance. And this is going to be part of the normal practice where once we get this information set up, we can then make some comparisons such as net income does it tie out, such as depreciation does it tie out on the cash flow statement to what we see here on the income statement, then we can have this other information which will be given in both problems in practice, of course, we’ll just go to the gym. General Ledger. And we’ll get this information in a book problem, we don’t want to give all the detail of a general ledger or just when we’re going over an example.
In this presentation, we will continue on with our statement of cash flows using the indirect method looking in on the change in accounts payable, we’re going to be using this information or a comparative balance sheet income statement and other information focusing primarily on comparative balance sheet creating a worksheet with it, looking like this. This basically being the comparative balance sheet. But in a post closing trial balance format, we have our two periods and the difference between those periods here. Our goal is to find a home for all of these differences. Once we do so we’ll end up with basically the change in cash. That being our bottom line that we’re looking for. We’ve gone through this information in terms of the cash flows from operations. We’re currently looking through the current assets, and now we’re moving on to the current liabilities. So we’ve looked at the accounts receivable, the inventory, prepaid expenses, we have these here. We’re moving on now to a liability and notice when we do that, when we’re working From the worksheet, we’re kind of skipping over some things here.
Hello in this presentation we will discuss the post closing trial balance and financial statements. When considering the financial statement relationship to the trial balance, we typically think of the adjusted trial balance that being used to create the financial statement. It’s important to note, however, that any trial balance that we use can be generated into financial statements. It’s just that the adjusted trial balance is the one that we have totally completed and prepared and ready. In order to create the financial statements to be as correct as possible as of the date we want them, which is usually the end of the month or the end of the year. Note that the names of the unadjusted trial balance the adjusted trial balance and the post closing trial balance are really a convention they’re all basically trial balances.
In this presentation, we will continue with the statement of cash flows indirect method looking at the change in prepaid expenses, we’re going to be using this information, we’ve got the comparative balance sheet, we’ve got the income statement and some additional information, we will be working primarily with the difference in the comparative balance sheet with the use of a worksheet taking this information to create this worksheet. So this is just basically a comparative balance sheet that has been condensed down to something that looks like a post closing trial balance. We are constructing our cash flows from operations from it, we have all of our differences. We’re basically just finding a home for these differences. We know if we do so that if we find a home for all of these differences, then it’ll add up to that difference, the difference in cash, which is basically the bottom line of our cash flow statement, or that’s what we want to get to in terms of adding up the cash flows. So we’ve gotten so far We’re working on the cash flows from operations. And we’ve done the cash flows in terms of the accounts receivable, inventory. Now we’re on prepaid expenses. We’re just going through these.
Hello in this section we will define the post closing trial balance. When seeing the post closing trial balance, it’s easiest to look at it in comparison to the adjusted trial balance and consider where we are at in the accounting cycle in the accounting process. When we see these terms such as the adjusted trial balance and post closing trial balance, as well as an unadjusted trial balance, we’re really talking about the same type of thing. We’re talking about a trial balance, meaning we’re going to have the accounts with balances in them. And we’re going to have the amounts related to them. And of course, the debits and the credits will always remain in balance. If it is a trial balance, no matter the name, whether it be just a trial balance on an adjusted trial balance and adjusted trial balance or a post closing trial balance.
Hello in this lecture we’re going to talk about the objectives of the closing process the closing process will happen after the financial statements have been created. So we will have done the journal entries where we will have compiled those journal entries into a trial balance, and then we will have made the financial statements. And then as of the end of the period in this case, we’re going to say as of December, when we move into the next time period, January, what we need to do is close out some of the temporary accounts those accounts including the income statement and the draws account so that we can start the new period from start in a similar way as if we were trying to see how many miles we could drive say in a month. If we wanted to Vince in December, and then see how many miles we’re going to drive in January of next year.
Hello in this lecture we will discuss the accounting building blocks and the double entry accounting system. At the end of this we will be able to define and describe the double entry accounting system, write down the accounting equation and define each individual part of it, define and describe debits and credits, define a balance sheet and list its parts define an income statement list its parts and explain the relationship between the balance sheet and the income statement. Okay, so starting off every business and accounting software uses the double entry accounting system. So the double entry accounting system, it’s kind of like the math behind the calculator, every software is going to use it. In order to understand what the system is doing, we need to understand the double entry accounting system.
Hello, in this presentation, we’re going to be talking about the accounting cycle or the accounting process, that process that the accounting department will go through on a systematic basis over and over and over again, typically thought of as a monthly process. Although it could be thought of as a yearly process or some other process in terms of the amount of time that will pass. But these are going to be the steps that we’ll be going through in terms of the accounting process, always keeping in mind that in goal of financial accounting, which are the financial statements, some texts will have more steps than five as we have here. Some texts will have less than five steps. But the goal here is to really have a broad picture big picture, so that when we think about the accounting process, we can break down that that big picture view, five is a pretty good number for us to be able to memorize and keep in our mind if we have more than that, it can start to kind of muddy the picture.