accounting fundamentals

Accounting FundamentalsAccounting Fundamentals

Dr. Yan XiongDr. Yan XiongDepartment of AccountancyDepartment of Accountancy

CSU SacramentoCSU SacramentoThe lecture notes are primarily based on Reimers The lecture notes are primarily based on Reimers

(2003). (2003).

7/11/037/11/03

Chapter 10: Statement of Cash FlowsChapter 10: Statement of Cash FlowsAgendaAgenda

Overview of SCFOverview of SCF Direct MethodDirect Method Indirect MethodIndirect Method

AgendaAgenda Overview of SCFOverview of SCF

Purpose of the Statement of Cash FlowsPurpose of the Statement of Cash Flows To show how the business To show how the business acquiredacquired its its

cash during the current yearcash during the current year To show how the business To show how the business spentspent its its

cash during the current yearcash during the current yearThis information is crucial for This information is crucial for decision makers decision makers predict future cash predict future cash flowsflows of the business. of the business.

What Is Considered “CASH” For The What Is Considered “CASH” For The Statement Of Cash Flows?Statement Of Cash Flows?

Cash includes cash and cash equivalents for Cash includes cash and cash equivalents for purpose of the statement.purpose of the statement.

Cash Equivalents areCash Equivalents are Short-term, highly liquid investments.Short-term, highly liquid investments. Easily convertible into known amounts of cash.Easily convertible into known amounts of cash.

Categories of Cash FlowsCategories of Cash Flows

Categories are based on activities related to cash flows:

1.1. OperatingOperating the business.2.2. Investing Investing in productive assets.3.3. FinancingFinancing the business.

These are the sections of the Statement of Cash Flows.

Operating ActivitiesOperating Activities Cash inflows and outflows that are directly related Cash inflows and outflows that are directly related

to income from normal operations. to income from normal operations. Technically, FASB defines operating activities as Technically, FASB defines operating activities as

those that are those that are not not investing or financing activities.investing or financing activities. There are two ways to compute net cash flow from There are two ways to compute net cash flow from

operating activitiesoperating activities:: Direct methodDirect method Indirect methodIndirect method

Cash Flows from Operating ActivitiesCash Flows from Operating Activities

Cash inflows and outflows that are directly Cash inflows and outflows that are directly related to income from normal operations. related to income from normal operations.

InflowsInflows include: include: Receipts from customers.Receipts from customers. Interest on receivables.Interest on receivables. Dividends Dividends received.received.

Cash Flows from Operating ActivitiesCash Flows from Operating ActivitiesCash inflows and outflows that are directly Cash inflows and outflows that are directly

related to income from normal operations. related to income from normal operations. OutflowsOutflows include: include:

Payments to vendors.Payments to vendors. Interest paid on liabilities.Interest paid on liabilities. Income taxes paid.Income taxes paid. Salary and wages payments to Salary and wages payments to

employees.employees.

Pay to the order of

Cash Flows from Investing ActivitiesCash Flows from Investing Activities Cash inflows and outflows that are related Cash inflows and outflows that are related

to the purchase and sale of productive to the purchase and sale of productive assets.assets.

Inflows Inflows include proceeds from:include proceeds from: Sales of property, plant, and equipment.Sales of property, plant, and equipment. Sales of investments in securities.Sales of investments in securities. Collection of principal on loans made to Collection of principal on loans made to

others.others.

Cash inflows and outflows that are related Cash inflows and outflows that are related to the purchase and sale of productive to the purchase and sale of productive assets.assets.

OutflowsOutflows include payments for: include payments for: The purchase of property, plant and The purchase of property, plant and

equipment.equipment. The purchase of long-term investments.The purchase of long-term investments. Loans to others.Loans to others.

Cash Flows from Investing ActivitiesCash Flows from Investing Activities

Cash inflows and outflows that are related Cash inflows and outflows that are related to how cash was obtained to finance the to how cash was obtained to finance the enterprise.enterprise.

InflowsInflows include: include: Proceeds from sale of stock.Proceeds from sale of stock. Proceeds from sale of bonds and Proceeds from sale of bonds and

from borrowings.from borrowings.

Cash Flows from Financing Cash Flows from Financing ActivitiesActivities

Cash inflows and outflows that are related Cash inflows and outflows that are related to how cash was obtained to finance the to how cash was obtained to finance the enterprise.enterprise.

OutflowsOutflows include: include: Payments to purchase treasury stock.Payments to purchase treasury stock. Principal payments to retire bonds Principal payments to retire bonds

and loans.and loans. Dividends paid to owners.Dividends paid to owners.

Cash Flows from Financing ActivitiesCash Flows from Financing Activities

Cash Flows from Noncash ActivitiesCash Flows from Noncash Activities

Investing and financing activities that Investing and financing activities that do not involve cashdo not involve cash, e.g., , e.g., Retirement of bonds by issuing Retirement of bonds by issuing

stock.stock. Settlement of debt by transferring Settlement of debt by transferring

assets.assets.Noncash activities must be Noncash activities must be discloseddisclosed

separately in the financial statements.separately in the financial statements.

Preparing the Statement of Cash FlowsPreparing the Statement of Cash FlowsThe face of the statement includes:The face of the statement includes:

Net Cash Flows from Net Cash Flows from OperatingOperating Activities Activities+Net Cash Flows from +Net Cash Flows from InvestingInvesting Activities Activities+Net Cash Flows from +Net Cash Flows from FinancingFinancing Activities Activities=Net Cash Flows for the period=Net Cash Flows for the period+ Beginning Cash Balance+ Beginning Cash Balance=End of period Cash Balance=End of period Cash Balance

Two Alternative ApproachesTwo Alternative ApproachesIndirect MethodIndirect Method

Shows net cash inflow (outflow) from Shows net cash inflow (outflow) from operations as an adjustment of net income.operations as an adjustment of net income.

Used by 97% of companies.Used by 97% of companies.Direct MethodDirect Method

Reports the components of cash from Reports the components of cash from operations as gross receipts and payments.operations as gross receipts and payments.

Recommended by the FASB, but rarely used.Recommended by the FASB, but rarely used.

Accounting records are kept on the accrual basis (GAAP).Accounting records are kept on the accrual basis (GAAP). Cash data must be developed before the SCF can be prepared Cash data must be developed before the SCF can be prepared

(especially for operating activities).(especially for operating activities). The examples that follow demonstrate the The examples that follow demonstrate the direct methoddirect method for for

converting accrual data to cash data.converting accrual data to cash data.

Converting Accrual Data to Cash DataConverting Accrual Data to Cash Data

Three Information Sources Are UsedThree Information Sources Are Used1.1. The income statement for the The income statement for the

current period.current period.2.2. Comparative beginning of period Comparative beginning of period

and end of period balance sheets.and end of period balance sheets.3.3. Additional transaction details not Additional transaction details not

found in the financial statements.found in the financial statements.

AgendaAgenda Direct MethodDirect Method

Direct MethodDirect Method Income statement Income statement

approachapproach Look at each item Look at each item

on the income on the income statement to statement to determine how to determine how to make it a “cash” make it a “cash” numbernumber

Direct Method SCFDirect Method SCFConverting Revenues to Cash BasisConverting Revenues to Cash Basis

Accrual basis revenue includes sales Accrual basis revenue includes sales that did not result in cash inflows.that did not result in cash inflows.

Can be computed as:Can be computed as:

Revenue, Accrual basis

+ or -change in AR

= Revenue, Cash basis

Example: Direct Method SCFExample: Direct Method SCF

The A/R balance was $45,000 on 1/1/05 and The A/R balance was $45,000 on 1/1/05 and $52,000 on 12/31/05. If accrual sales revenue $52,000 on 12/31/05. If accrual sales revenue for 2005 was $600,000, what was cash basis for 2005 was $600,000, what was cash basis revenue?revenue?

Do you know what would make AR increase Do you know what would make AR increase by $7,000 during the year? It must have been by $7,000 during the year? It must have been sales for which the customers have not yet sales for which the customers have not yet paid.paid.


If accrual sales revenue for 2005 was If accrual sales revenue for 2005 was $600,000 (which we see on the income $600,000 (which we see on the income statement), what was cash basis statement), what was cash basis revenue?revenue?

Because there were $7,000 more sales Because there were $7,000 more sales than cash collected, the cash must be than cash collected, the cash must be $593,000 = $600,000 minus 7,000$593,000 = $600,000 minus 7,000

Identifying Cash Collected Identifying Cash Collected From CustomersFrom Customers Accounts receivable

BB 45,000 Credit sales 600,000

EB 52,000

593,000 Cash collections

Direct Method SCFDirect Method SCFAnother way to reason through this problem is:

AR beginning balance of $45,000 is collected first. That’s $45,000 cash inflow.

Then, sales of $600,000 were made (income statement). Because the AR ending balance is $52,000, cash sales must have been [$600,000 - 52,000] or $548,000.

The old AR collected in cash, $45,000, plus the cash sales for the period, $548,000, gives total cash collected from customers of $593,000.

Accrual basis expenses include Accrual basis expenses include expenses that have not yet been paid.expenses that have not yet been paid.


Direct Method Direct Method Converting Accrued Expenses to CashConverting Accrued Expenses to Cash

Expense, Accrual Basis + or -

changes in“expense” payables Expense,

Cash Basis


Salary Expense for 2005 was $500,000. Salary Expense for 2005 was $500,000. Salary Payable was $35,000 on Salary Payable was $35,000 on

12/31/04 and $10,000 on 12/31/05.12/31/04 and $10,000 on 12/31/05. How much cash was paid to How much cash was paid to

employees in 2005?employees in 2005?

Example: Direct Method SCFExample: Direct Method SCF First, the beginning amount of Salaries First, the beginning amount of Salaries

Payable was $35,000. That must have been Payable was $35,000. That must have been paid in cash first during 2005. paid in cash first during 2005.

Salary expense for the year was $500,000, Salary expense for the year was $500,000, but at year end, $10,000 of that amount had but at year end, $10,000 of that amount had not yet been paid.not yet been paid.

We know this because Salaries Payable on We know this because Salaries Payable on the 12/31/05 balance sheet is $10,000.the 12/31/05 balance sheet is $10,000.


So the total cash paid to employees So the total cash paid to employees during 2005:during 2005: $ 35,000 beginning Salaries payable$ 35,000 beginning Salaries payable

+ $490,000 cash paid this year+ $490,000 cash paid this year

= $525,000 total cash paid for salaries= $525,000 total cash paid for salaries

Identifying Cash Paid To EmployeesIdentifying Cash Paid To Employees

Salaries payable

500,000 Salary expense

10,000 EB

525,000Cash paid for salaries

35,000 BB


Another way to reason through this problem is to Another way to reason through this problem is to start with the salary expense amount from the start with the salary expense amount from the income statement: $500,000income statement: $500,000

Then, adjust that for the change in Salaries Then, adjust that for the change in Salaries Payable. Because Salaries Payable decreased by Payable. Because Salaries Payable decreased by $25,000, we must have paid that amount in cash $25,000, we must have paid that amount in cash to our employees. (How else could that decrease to our employees. (How else could that decrease have occurred?)have occurred?)

That gives a total cash paid to employees of That gives a total cash paid to employees of $525,000.$525,000.

Requires analysis of two accounts: Requires analysis of two accounts: inventory inventory and and accounts payable.accounts payable.


Direct MethodDirect MethodConverting Cost of Goods Sold Converting Cost of Goods Sold to Cash Basis to Cash Basis

Cost of Goods Sold

Cash paymentsto vendors

+or - changes in inventoryand

+ or - changes in accounts payable

Suppose CGS was $20,000; BI was $12,000 and EI was Suppose CGS was $20,000; BI was $12,000 and EI was $10,000; AP had a beginning balance of $13,000 and $10,000; AP had a beginning balance of $13,000 and an ending balance of $13,600. What was cash paid to an ending balance of $13,600. What was cash paid to vendors?vendors?

First, look at cost of goods sold and inventory.What happened to inventory during the period?

It went down. That means that of the $20,000 of CGS, $2,000 worth

came from the beginning inventory…in other words $2,000 of the cost of goods sold did not have to be purchased this year. So, only $18,000 of the cost of goods sold was this period’s purchases.

Now, how much of that $18,000 of purchases was actually paid for in cash? We need to look at the change in Accounts Payable.

The company had to purchase $18,000 worthof inventory.

Accounts Payable went up during the year by$600. That means that, of the total purchases of $18,000, all EXCEPT $600 (the increase in A/P)was paid for in cash.

That means that cash paid to vendors was $17,400.

Suppose CGS was $20,000; BI was $12,000 and Suppose CGS was $20,000; BI was $12,000 and EI was $10,000; AP had a beginning balance of EI was $10,000; AP had a beginning balance of $13,000 and an ending balance of $13,600. $13,000 and an ending balance of $13,600. What was cash paid to vendors?What was cash paid to vendors?

Identifying Cash Paid To VendorsIdentifying Cash Paid To Vendors Must analyze two accounts:Must analyze two accounts:

InventoryInventory Accounts payableAccounts payable

Identifying Cash Paid To VendorsIdentifying Cash Paid To Vendors First, analyze the Inventory account to First, analyze the Inventory account to

determine how much inventory was determine how much inventory was purchased during the period. purchased during the period.

Inventory

BB 12,000

EB 10,000

18,000Purchases 20,000 COGS

Identifying Cash Paid To VendorsIdentifying Cash Paid To Vendors

Second, analyze the Accounts payable Second, analyze the Accounts payable account to determine how much cash was account to determine how much cash was paid to vendors during the period. paid to vendors during the period.

Accounts payable

13,000 BB

13,600 EB

18,000 Purchases17,400Cash paid to vendors

To Summarize This ProblemTo Summarize This Problem Why is COST OF GOODS SOLD (from the income Why is COST OF GOODS SOLD (from the income

statement) not equal to cash? statement) not equal to cash? First, we might have sold some goods that we already First, we might have sold some goods that we already

had in the inventory or we may have had to buy all of the had in the inventory or we may have had to buy all of the goods we sold PLUS some more that we put into goods we sold PLUS some more that we put into building up the inventory. building up the inventory.

So, we must look at the change in inventory to see if So, we must look at the change in inventory to see if cost of goods sold is more or less than the inventory we cost of goods sold is more or less than the inventory we bought during the period. bought during the period.

Here our inventory went down, from $12,000 to $10,000. Here our inventory went down, from $12,000 to $10,000. That means we only had to buy $18,000 worth of the That means we only had to buy $18,000 worth of the goods we sold (the other $2,000 came out of the goods we sold (the other $2,000 came out of the beginning inventory).beginning inventory).

To Summarize This ProblemTo Summarize This Problem Now, did we actually have to pay for all $18,000 worth Now, did we actually have to pay for all $18,000 worth

of those goods? (Or did we pay for those of those goods? (Or did we pay for those plusplus some some we purchased the period before?) we purchased the period before?)

To figure that out, we have to look at Accounts To figure that out, we have to look at Accounts Payable (A/P). Payable (A/P).

Since A/P went UP, that means we bought some Since A/P went UP, that means we bought some things we didn’t pay for yet. How many? $600 worth—things we didn’t pay for yet. How many? $600 worth—that’s how much A/P went up. that’s how much A/P went up.

So, rather than paying for all $18,000 worth of our So, rather than paying for all $18,000 worth of our purchase, we only paid for $17,400 of them. purchase, we only paid for $17,400 of them.

To Summarize:To Summarize:

What kinds of accounts need to What kinds of accounts need to be examined to see if there is a be examined to see if there is a difference between our accrual difference between our accrual accounting records and actual accounting records and actual cash?cash?

versus

General Ledger

To Summarize:To Summarize:

Accounts ReceivableAccounts Receivable PrepaidsPrepaids InventoryInventory Accounts PayableAccounts Payable Other PayablesOther Payables

All current assets and current liabilities need to All current assets and current liabilities need to be examined in conjunction with revenue and be examined in conjunction with revenue and expense accounts.expense accounts.

An Example: An Example: Tom’s Wear Inc.: March 2001Tom’s Wear Inc.: March 2001

To use the indirect method of preparing a To use the indirect method of preparing a statement of cash flows, we’ll examine statement of cash flows, we’ll examine each item on the income statement and each item on the income statement and make it “cash.”make it “cash.”

We’ll need the income statement and We’ll need the income statement and beginning and ending balance sheets for beginning and ending balance sheets for the period.the period.

Tom’s Wear, Inc. Income Statement

For the month ended March 31, 2001

Sales revenue $2,000 Expenses Cost of goods sold 800 Depreciation expense

100

Insurance expense 50 Interest expense 30 980 Net Income $ 1,020

Reference: The March Income StatementReference: The March Income Statement

The Comparative Balance SheetsThe Comparative Balance Sheets

Retained Earnings

2,240 1,220

March 31 March 1 March 31 March 1Cash $3,995 $6,695 A/P $-0- $800

Other payables

-0- 50A/R 2,000 150 Int/Payable 30 -0-

Inventory 300 100 Notes payable 3,000 -0-Prepaid insur. 75 125 Total liabilities 3,030 850

Machine (net of $100 accumulated depreciation)

3,900 0 Common Stock

5,000 5,000

Total Assets $10,270 $7,070 Total L + SHs Equtiy

$10,270 $7,070

Tom’s Wear Inc.-- March 2001Tom’s Wear Inc.-- March 2001

We’ll start on the income statement with We’ll start on the income statement with Sales. How much CASH was collected Sales. How much CASH was collected from customers?from customers?

Sales for March were $2,000. Sales for March were $2,000. But Accounts Receivable went from a But Accounts Receivable went from a

beginning balance of $150 to an ending beginning balance of $150 to an ending balance of $2,000.balance of $2,000.

Because AR increased by $1,850, we must Because AR increased by $1,850, we must have only collected $150 cash.have only collected $150 cash.

Identifying Cash Collected From Identifying Cash Collected From CustomersCustomers

Accounts receivable

BB 150

Credit sales 2,000

EB 2,000

150Cash collections


Cost of goods sold is $800. And inventory Cost of goods sold is $800. And inventory increased from 100 to 300. That means that increased from 100 to 300. That means that $1,000 worth of inventory must have been $1,000 worth of inventory must have been purchased-- enough to sell $800 worth and purchased-- enough to sell $800 worth and build up the inventory by another $200.build up the inventory by another $200.

How much cash was paid to vendors? We How much cash was paid to vendors? We need to check out what happened to need to check out what happened to Accounts Payable during the month.Accounts Payable during the month.


First, analyze the Inventory account to First, analyze the Inventory account to determine how much inventory was determine how much inventory was purchased during the period. purchased during the period.

Inventory

BB 100

EB 300

1,000Purchases 800 COGS


Accounts Payable started the month at $800. Accounts Payable started the month at $800. That means Tom’s Wear owed $800 to That means Tom’s Wear owed $800 to vendors at the beginning of March.vendors at the beginning of March.

At the end of March, the Accounts Payable At the end of March, the Accounts Payable balance is $0. That means Tom’s Wear paid balance is $0. That means Tom’s Wear paid for ALL of the month’s purchases ($1,000) for ALL of the month’s purchases ($1,000) PLUS $800 owned from February. PLUS $800 owned from February.

The total cash paid to vendors was $1,800.The total cash paid to vendors was $1,800.


Second, analyze the Accounts payable Second, analyze the Accounts payable account to determine how much cash was account to determine how much cash was paid to vendors during the period. paid to vendors during the period.

Accounts payable

800 BB

0 EB

1,000 Purchases1,800Cash paid to vendors


Depreciation expense is a Depreciation expense is a non-cash expense, so we non-cash expense, so we can simply ignore it.can simply ignore it.

Tom’s Wear Inc.-- March 2001Tom’s Wear Inc.-- March 2001 Insurance expense for the month was $50. To Insurance expense for the month was $50. To

figure out how much cash was actually paid figure out how much cash was actually paid for insurance, we have to look at what for insurance, we have to look at what happened to Prepaid Insurance. happened to Prepaid Insurance.

The comparative balance sheets show that The comparative balance sheets show that Prepaid Insurance went from $125 to $75. That Prepaid Insurance went from $125 to $75. That means the insurance expense of $50 came means the insurance expense of $50 came totally from the Prepaid Insurance, so no cash totally from the Prepaid Insurance, so no cash was disbursed for insurance.was disbursed for insurance.

Identifying Cash Paid Identifying Cash Paid For InsuranceFor Insurance Prepaid insurance

BB 125

EB 75

50Insurance expense 0Cash paid for

insurance

Interest expense for the month was $30. Interest expense for the month was $30. To figure out how much cash was To figure out how much cash was actually paid for interest, we have to look actually paid for interest, we have to look at what happened to interest payable. at what happened to interest payable.

The comparative balance sheets show The comparative balance sheets show that interest payable went from $0 to $30. that interest payable went from $0 to $30. That means the interest expense of $30 That means the interest expense of $30 has NOT been paid. So, no cash was paid has NOT been paid. So, no cash was paid for interest.for interest.


Identifying Cash Paid Identifying Cash Paid For InterestFor Interest Interest payable

30 Interest expense

30 EB

0Cash paid for interest

0 BB

What Else?What Else? The only other cash disbursements we The only other cash disbursements we

have to worry about are any that were have to worry about are any that were made for expenses from a prior year. That made for expenses from a prior year. That means we must look for any payables that means we must look for any payables that were there at the beginning of the year, were there at the beginning of the year, but are no longer there. but are no longer there.

In this example, there is a $50 cash In this example, there is a $50 cash disbursement made to pay off the $50 disbursement made to pay off the $50 “other” payable shown on the beginning “other” payable shown on the beginning balance sheet. balance sheet.

Adding up all the disbursements:Adding up all the disbursements:

To vendorsTo vendors $1,800$1,800InsuranceInsurance $ 0$ 0InventoryInventory $ 0$ 0OtherOther 50 50Total outflowTotal outflow $1,850$1,850

Tom’s WearTom’s WearStatement of Cash FlowsStatement of Cash Flows

For the month ended March 2001For the month ended March 2001

Cash from operations:Cash from operations:Cash from customersCash from customers $ 150 $ 150Cash paid to vendorsCash paid to vendors (1,800) (1,800)Cash paid for other expenses Cash paid for other expenses ( 50) ( 50)Net cash (outflow) from operationsNet cash (outflow) from operations $(1,700) $(1,700)

Indirect MethodIndirect Method

Net cash flows from operating activities are determined by . . .Net cash flows from operating activities are determined by . . .• Starting with Starting with net incomenet income, then . . ., then . . .• Adding and subtracting items that reconcile net income to operating Adding and subtracting items that reconcile net income to operating

cash flows.cash flows. Requires an analysis of Requires an analysis of changeschanges in all current asset and current liability in all current asset and current liability

accounts, except cash.accounts, except cash.

AgendaAgenda Indirect MethodIndirect Method


Noncash additions to net income:Noncash additions to net income: Depreciation, depletion, and Depreciation, depletion, and

amortization.amortization. All losses.All losses.

Noncash deductions from net Noncash deductions from net income:income: All gains.All gains.


Net incomeNet income+ depreciation+ depreciation+ bad debt expense+ bad debt expense

+ cash received from last year’s sales+ cash received from last year’s sales- sales made but cash not received- sales made but cash not receivedetc.etc.

Cash from Operations—Indirect Method Tom’s Wear, Inc.

For the month end March 31, 2001

Net Income $1,020 +depreciation expense 100 - increase in AR (1,850) - increase in inventory ( 200) +decrease in prepaid insurance 50 - decrease in payables ( 820)

Net cash from operations $ (1,700)

Summary of Differences Summary of Differences Between Direct and Indirect Between Direct and Indirect MethodsMethods

The direct method provides The direct method provides more detail more detail about cash about cash from operating activities.from operating activities. Shows individual operating cash flows.Shows individual operating cash flows. Shows reconciliation of operating cash Shows reconciliation of operating cash

flows to net income in a supplemental flows to net income in a supplemental schedule.schedule.

The The investing and financing sectionsinvesting and financing sections for the two for the two methods are identical.methods are identical.

Net cash flowNet cash flow is the same for both methods. is the same for both methods.

How Important Is The Statement How Important Is The Statement Of Cash Flows?Of Cash Flows?

It is crucial to the presentation It is crucial to the presentation of a complete picture of the of a complete picture of the financial status of a business.financial status of a business.

Many businesses with great Many businesses with great ideas and potential have failed ideas and potential have failed due to their failure to manage due to their failure to manage their cash flows.their cash flows.

Remember, the statement is Remember, the statement is REQUIRED by GAAP.REQUIRED by GAAP.

P10-6A

Martin Company: Cash from investing and financing activities

a. Cash from InvestingSale of equipment $10,000

Purchase of equipment (80,000)

Net cash from investing activities $(70,000)

b. Cash from FinancingDividends paid $(2,000)

Sale of treasury stock 90,000

Repayment of loan principal (21,000)

Net cash from financing activities $67,000

a. Statement of Cash FlowsCash from operations (direct method)

Cash collected from customers $149,80

Cash paid to vendors (80,300)

Cash paid to employees (31,800)

Cash paid for other expenses (12,400)

Cash paid for taxes (8,400)

Total cash from operations $16,90

Cash used in investing activities

Equipment purchase $(43,300) (43,300)

Cash used in financing activities

Issued note payable $20,000 20,000

Net increase (decrease) in cash $ (6,400)

accounting fundamentals

Documents

future cash flows

statement of cash flowsto

known amounts of cash

cash equivalents areshortterm

order ofcash flows

sale of productive assets

sale of bonds

sale of stock