Cash Flow Worksheet #2
Example - Direct Method

The following sample problem provides an opportunity for you to apply the principles of cash flow. The problem uses financial information from a fictitious company. Using this as an example, you will see how to complete a cash flow worksheet using the direct method. A separate worksheet shows how to complete a cash flow statement using the indirect method.

Cash Flow Statement
Sample Company

 

Sales		$1,800	From the income statement.
Accounts receivable
Beginning	$200		From the balance sheet.
Ending	400		From the balance sheet.
B - E		-200	Subtract ending accounts receivable from beginning accounts receivable. Represents sales that were made on account and money has not yet been collected.
		=====
Cash received from customers		1,600	Total of above lines.
			Represents cash collected from customers on cash sales and sales on account.
Total operating expenses		-1,400	Total of cost of sales and operating expenses from the income statement.
Depreciation		100	Ending accumulated depreciation less beginning accumulated depreciation from the balance sheet. Represents a non-cash item.
Inventory
Beginning	200		From the balance sheet.
Ending	300		From the balance sheet.
B - E		-100	Subtract ending inventory from beginning inventory. Represents additional inventory purchased for sale.
Accounts payable
Ending	$300		From the balance sheet.
Beginning	100		From the balance sheet.
E - B	$200		Subtract beginning accounts payable from ending accounts payable. Represents expenses and inventory purchases charged on account.
Cash paid to suppliers and employees		-1,300	Total of above lines.
			Represents cash paid for inventory purchases and operating expenses less amount financed by vendors.
Interest income received		20	From income statement.
Interest expense paid		-100	From income statement.
Income tax expense	-120		From income statement.
Income taxes payable
Ending	$100		From balance sheet.
Beginning	$100		From balance sheet.
E - B	--0--
Income taxes paid		120	Add change in income taxes payable to income tax expense.
Cash flow from (used for) operations		200	Total of above lines.
Purchases of equipment		-100	Ending cost of fixed assets less beginning cost of fixed assets.
Proceeds from note payable		200	From "other assumptions" section.
Principle payments on notes payable		-300	Beginning note payable less ending note payable less amount of new loans.

 

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