Financial Accounting: Statement of Cash Flows

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• published: 30 May 2013
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Introduction to Financial Accounting Statement of Cash Flows (Chapter 14) May 6th, 2013 by Professor Victoria Chiu The Professor begins where the previous lecture left off, continuing the discussion revolving around the operating activities of the statement of cash flows. Operating activities are the type of activities that lead to the inception of revenues, expenses, gains, and losses. Investing activities, on the other hand, involve long term assets such as land, equipment, buildings (plant assets in general), as well as activities involving long-tern notes receivable. Financing activities usually involve changes in long-term liabilities and equity (the right hand side of the balance sheet). Financing activities including issuing stock, paying out dividends, and buying & selling treasury stock. Following this, an illustration of the statement of cash flows (under the indirect method) is displayed. Note that the indirect method for preparing the statement of cash flows is by far the most popular and most widely used in the business and accounting world. Noncash investing and financing activities are also covered (for example, issuing stock to an individual in exchange for a building). After this, the Professor goes over an example in which an activity must be identified as one of the three types of activities (operating, financing, and investing). After completing the problem, the effects of certain operating activities on the statement of cash flows is shown. For example, depreciation expense is added on the statement of cash flows. Gains on sale are subtracted. Essentially, throughout the duration of this lecture, the Professor shows the relationship between the statement of cash flows and the income statement & balance sheet, and also goes through in-depth explanations for each section of the statement of cash flows and how to calculate certain items. Which items would be subtracted and which items would be added is also discussed. ------QUICK NAVIGATION------ Operating Activities: 0:28 Investing Activities: 5:37 Financing Activities: 9:22 Statement of Cash Flows - Indirect Method (Illustration) 11:40 Noncash Investing & Financing: 17:41 Exercise S14-3 - Classifying Items on the Indirect Statement of Cash Flows: 21:05 Preparing the Statement of Cash Flows Using the Indirect Method: 26:38 Cash Flows from Operating Activities - Indirect Method: 26:44 Income Statement: 31:57 Changes in Current Assets (other than cash) and Current Liabilities: 33:29 Comparative Balance Sheet: 36:48 Cash Flows from Operating Activities: 43:25 Cash Flows from Investing Activities: 44:38 Computing Cash Flows from Investing Activities Summary: 46:46 Computing Acquisitions & Sales of Plant Assets: 48:08 Cash From Selling Plant Assets: 50:40 Computing Cash Flows from Investing Activities Summary: 53:32 Partial Statement of Cash Flows (illustration): 54:20 Cash Flows from Financing Activities: 55:05 Long-term Notes Payable: 57:24 Issuances of Stock & Purchases of Treasury Stock: 59:24 Computing Dividend Payments: 1:02:34 Complete Statement of Cash Flows: 1:04:09 Net Changes in Cash & Cash Balances: 1:05:50 Exercise S14-5 - Computing Cash Flows from Operating Activities - Indirect Method: 1:07:51