In this presentation, we will take a look at classifications of cash flows on the statement of cash flows, there’s going to be three major categories on the statement of cash flows. Those will be operating activities, investing activities, and financing activities. So our goal here, when we go through the statement of cash flow as we work through the statement of cash flows is going to be in part to decide which area these cash flows should go, should they go into operating, investing or financing. It’s going to be common questions and common problems and really just information we need to know when reading the statement of cash flows. So we’ll start off with the operating activities. We’re just going to look at the major components of the cash flows within the operating activities. So we’ll talk about inflows and outflows. Remember what we’re talking about here is cash. So when we’re talking about the statement of cash flows, we’re talking about cash flows, the cash that goes into the company, they cashed out goes out to the company. We’re going to talk about inflows and outflows here related to operating activities. Before we go into the list of inflows and outflows related to operating activities, we want to know first, that operating activities is going to be similar to us thinking about the income statement on a cash basis. So when we think about the operating activities were really thinking or one way to think about it would be that if we were to have the income statement on a cash basis, then what would the inflows and outflows be that’ll basically be what are in the operating activities when we get to the thought process in terms of how to determine operating investing and financing activities.
Posts with the Income Statement tag
Statement of Cash Flows Introduction
In this presentation, we will introduce the financial statement of statement of cash flows. When thinking about the statement of cash flows, we want to compare and contrast the reasons for it to what the other financial statements are providing us what information in other words, are we going to get from the statement of cash flows that’s not on the other financial statements, those being the balance sheet, the income statement, the statement of equity, we’re mainly comparing against the income statement, because the statement of cash flows going to give us some similar information. It’s going to give us information over time, what’s happening over time, unlike the balance sheet, which is going to have a point in time. So we’re still looking at at timing what is what is going on over time. That’s typically our income statement, which measures performance. The major goal of the income statement is to measure performance, how have we done how much work have we done, revenue minus expenses, revenue being recognized when we earn the work when we’ve done the job expenses when we We’ve incurred something in order to help generate in the same time period. And that’s going to be the net income. What that doesn’t do, however, is measure cash flow. And when we first learn about the income statement, that’s going to be a real big distinction we want to look at, we want to say, okay, the income statements on an accrual basis.
Bond Retirement
In this presentation, we will discuss the journal entries related to the retirement of bonds. the retirement of bonds just means that we’re going to pay off the bonds in some form or another at some time or another, meaning the bonds are going to go away. Typically, that’ll happen at the maturity date at the end of the bond. So for example, if we have a bond on these terms, with the face amount of 240, the issue price of 198 for 80, for 15 year bonds, they’re going to be semi annual. What would happen is when we put this on the books, we would put it on the books as cash we got for the 198, the bond payable on the books for 240, and then a discount. And then of course, over the life of the bond, we would be paying interest for that 15 year time period two times that’s 30 payments. And then at the end of this we would also be be amortizing out the discount to get rid of it, to make it go away to the interest and then By the end of this time period, the discount would be zero. And we would only be left with a bond on the books. In other words, at the maturity date, we would have something like this on our trial balance, the discount is now zero. And the bond is on the books at 240, which is the face amount of the bond, if it were a premium, it would be it would be the same in that we would be left with just the bond amount and the premium would be gone to zero. And now it’s just like anything else that we don’t have to deal with interest at this point or anything else, we just need to close out the bond. And so it’s just like any other liability, we’re just going to pay at the maturity date. That’s how we’re going to retire it. So this is a 240 credit, we’re going to make it go down by doing the opposite thing to it a debit, and we’re going to pay cash, cash is a debit balance, we need to make it go down. So we’re going to credit cash. So this is going to be our journal entry. We’ll debit the bond make go away, and then we’ll pay off the cash. When we post this then the bond payable will be here. Here, it’s going to go it’s a credit, we’re going to debit it, making it go away to zero, and then the cash has a debit balance, we’re going to credit it making the cash go down. So it’s a pretty straightforward journal entry.
02:12
The only confusing thing about this journal entry is that it happens at the end of the bond term. So when we’re talking about book questions, we often don’t get asked it because usually we’re concentrating on how to calculate the interest how to calculate the face amount of the bond, how to record the bond, how to amortize the the bond, discount or premium. And we don’t really typically get all the way to the end of the bond, the retirement the maturity date, to record the end transaction oftentimes, and it’s a pretty easy transaction if we were to do so. And it’s a lot easier to if we can actually see the trial balance. When you see the trial balance, you say, oh, there’s a liability there. We’re going to pay it just like we would if it were note payable at this time. It needs to go down and then we’re going to pay it off with cash. Now it is possible for us To have a callable bond that we’re going to retire before the end of the bond date before the maturity date. So in other words, in this case, we have the bond on the books of 240,000. And we have the discount of 338 748. And therefore, if we were to calculate the carrying amount, we’d have 240,000 minus 238 748, or two a one 252. This 201 252 is the carrying amount of this bond payable. This is something that we owe in the future. If we can pay it off at this point in time for some cash that’s going to be less than this amount, then we’re going to have a gain resulting in a gain. And if we are paying it off early for something more than this, we’re going to have a loss. So let’s see what that’s going to look like.
03:52
The gain or loss can be confusing here. When we’re talking about a bond. It’s easier to get to that point by just doing the journaling So if we have all this information, especially if we have the trial balance, because then we can see what accounts are debited and credited on the trial balance or which accounts have a debit or credit balance, then it’s a lot easier for us to construct the journal entry. So the first is going to be given to us, we’re going to say that the cash that we’re paying is 230,000. That’s gonna have to just be given in the problem because that’s the callable price that’s how much we’re able to purchase these bonds for. So cash is going to go down because remember, we are buying them back basically, or we’re we’re paying them off early before the maturity date. So it’s going to be 230. Then we’re going to say that the bond payable has to go off the books. Now the bond payables on the books at 240,000, we can see it’s a liability, it has a credit balance. So to take it off the books, we do the opposite thing to it, a debit for whatever it needs to be to make it go to zero, the discount. Same thing we need to do whatever we need to do to make it go to zero because it’s Gotta go away. So when we construct the journal entry, we just know that we just got to do whatever we need to do to make it go to zero. If you have a trial balance in front of you, that’s easy to do, because we can see the discounts on the books at a debit. And we need to do the opposite to make it go down, which is a credit. If you’re looking at a book problem that doesn’t give you a trial balance, and just tells you that the bond is on the books at a discount, then you got to think through it. And one way to think through it might be to say, well, the bonds is a liability, it must be a credit, that discount means that we’re making the bond go down, because it must be decreasing, we’re having it less than the state, the face amount, the sticker price.
05:40
And since it’s a credit, the thing that makes a credit go down would be a debit. So that discount must be a debit because these two are really combined together. And a discount means that we we really the net of the two are below the face amount price, so this must be a debit. So if it were a premium, then this amount be increasing or greater than the face amount, and it would be a credit normal balance. Once we know that this is a, this is a debit normal balance for a discount, then we can do the opposite thing to it to credit it to make it go down. And then of course, we just need to figure out what the difference is we’ve got credits of 230,038 748 minus the 240. Debit means we need a 28 748 debit. And that of course, in this case, I’m going to say it’s a gain loss account here because it could have gone either way. But if it’s a debit here, then it’s on the income statement. That’s going to be a loss. And you just got to basically start to be able to recognize that why would that be a loss? Well, you can think through that. We paid 230 versus the carrying value, or you can also just think well, if it’s a debit on the income statement, It’s acting more like an expense, meaning expenses have debit balances, they go up in the debit direction, and they bring net income down.
07:08
Revenue has a credit balance, it brings net income up. This is acting like a, an expense because it’s a debit balance. If we debit the income statement, it’s going to make net income go down, that means it must be a loss rather than a gain, which we would think would make net income go up. So the other way we can think about this is to is remember, the carrying value is going to be the 240,000 minus the 38 748. So this is kind of a value that we owe on the bond. And it’s a liability, that’s kind of the value we owe and we paid more than the value that we owe. So that’s going to be a loss in this case. And that’s another way you can think through it being a loss. So if we post this out, then we’re going to say that the gain or loss 28 748 Here, making the income statement accounts go up, kind of like an expense bringing net income down. The bond payable will be posted here, it’s going to make the bond payable go to zero. That’s why we are retiring. It’s making it go away. And then we’ve got the discount, it’s going to make the discount go to zero because we’re retiring it as well. And then the cash is going to be here, cash is going to go down. So there’s going to be our transaction. We have the bond payable and discount going away which has to be the case if we’re retiring the bonds. The cash is going down for the early retirement. And we resulted in a loss in order for us to be able to retire the bonds early.
Allowance Method % Accounts Receivable vs % Sales Method
In this presentation, we will be taking a look at the allowance method for accounts receivable focusing in on the calculation of the allowance for doubtful accounts. There are two methods that can be used in order to calculate the allowance for doubtful accounts accounts. One being the percentage of accounts receivable, the other is the percentage of sales, we will take a look at them both and look at the pros and cons of them. First, we’re going to look at the accounts receivable method. We’re going to start off with the percentage of accounts receivable method for a few different reasons. One, it’s the one that’s most often tested. And two is the one that may be most often used in practice often making the most sense to people that are looking at the two methods. It’s also a bit more complicated. So when we’re looking at test questions, they typically would focus on this method in order to have a bit more complicated process to do the calculation.
Allowance Method VS Direct Write Off Method
In this presentation, we will take a look at a comparison between the allowance method and the direct write off method. When considering both the allowance method and the direct write off method, we are considering the accounts receivable account. Remember that the accounts receivable account represents some money that is owed to the company, typically from sales made in the past, on account haven’t yet received the funds for sales made in the past and therefore, the company is owed money. We see this amount on the trial balance in this case 1,000,001 91. We then want to know information about that, including who owes us that money. We can’t find that typically in the GL as we have a GL for every account the GL only giving us the information by date. Typically, we want to see that information also broken out in the subsidiary ledger saying who owes us this money.
Receivables Introduction
In this presentation we will take a look at receivables. The major two types of receivables and the ones we will be concentrating on here are accounts receivable and notes receivable. There are other types of receivables we may see on the financial statements or trial balance or Chart of Accounts, including receivables, such as rent receivable, and interest receivable. Anything that has a receivable, it basically means that someone owes us something in the future. We’re going to start off talking about accounts receivable that’s going to be the most common most familiar most used type of receivable and that means something someone, some person some company, some customer typically owes us money for a transaction happening in the past, typically some type of sales transaction. So if we record the sales transaction, that would typically be the way accounts receivable would start within the financial statements, meaning If we made a sale, we would credit the revenue account, we’ll call it sales. If we sell inventory, it would be called sales. If we sold something else, it might be called fees earned, or just revenue or just income, increasing income with a credit, and then the debit not going to cash. But going to accounts receivable.
Inventory Tracking Explained – Introduction-Specific 10 600
Hello. In this lecture we’re going to talk about the idea of tracking inventory and recording inventory, both in terms of the balance sheet as well as the income statement in the format of cost of goods sold. In our example, we’re going to be purchasing and selling forklifts, meaning we’re going to purchase forklifts from the factory and then we’re going to sell those forklifts. That means that forklifts to us will be inventory their inventory because we are purchasing the forklifts in order to resell them for the generation of revenue. That’s really going to be the definition of inventory the purchasing of something for the resale of it as opposed to if we were someone else purchasing the forklift in order to help us generate revenue in another way through the use of the forklift, in which case it would then be property plant and equipment.
Financial Statement Relationships 18
Hello in this presentation we’re going to take a look at financial statement relationships. In other words, how do these financial statements fit together? How do these financial statements represent the double entry accounting system in the format of the accounting equation that have assets equal liabilities plus equity? First, we’ll take a look at the balance sheet. Note that most textbooks will talk about this relationship and constructing the financial statements by first saying to construct the income statement, then the statement of equity and then the balance sheet. If you’re constructing things by hand with a paper and pencil, that does reduce the number of calculations that you would need to do, however, if you’re using something like Excel, then it’s a lot easier to sum up columns of numbers and it might be useful to take a look at the balance sheet. In any case, the relationships will be the same when we consider the relationships between the financial statements.
Statement of Equity From Trial Balance 17
More in this presentation we will take a look at the statement of owner’s equity and see how to construct the statement of owner’s equity from the trial balance. When looking at the trial balance, we can see the accounts will be in order with the assets and then the liabilities, then the equity and then the revenue and expenses. The equity accounts being broken out here of owner capital and draws. But it’s a little deceiving to break out this equity section. Because the trial balance really is showing both a point in time the balance sheet account permanent accounts up top and timing accounts which are going to be the revenue accounts down below. When we think about the point in time for total equity as a whole. We’re really considering the entire blue area here. This is one of the most confusing concepts to really know when you’re looking at these financial statements.
Income Statement from Trial Balance 16
Hello in this presentation we’re going to take a look at the creation of the income statement from the trial balance. First, we want to take a look at the trial balance and consider where the income statement accounts will be. When looking at the trial balance, it will be in order we have the assets in green, the liabilities in orange, the equity in light blue, and then the income statement accounts including revenue and expenses. That’s what we are concentrating here we’re looking at those income statement accounts. And that is what will be used in order to create the financial statements to create the income statement. Note that all the blue accounts represents the equity section. So the income statement really is going to be part of total equity. If we consider that on the balance sheet, then we’re really looking at a component of this capital account.