tailieunhanh - Principles of Accounting- Preparing the Statement of Cash Flows

The income statement and the statement of cash flows meet the different demands for information | Fulbright Economics Teaching Program Principles of accounting Lecture 4a 2005-2006 Fulbright Economics Teaching Program Ho Chi Minh City, Vietnam Academic Year: 2005-2006 Principles of Accounting 7/17/2006 Nguyễn Tấn Bình 1 Lecture Notes 4a Preparing the Statement of Cash Flows 7/17/2006 Nguyễn Tấn Bình 2 Nguyen Tan Binh 1 Fulbright Economics Teaching Program Principles of accounting Lecture 4a 2005-2006 Cash Flows and Income The income statement and the statement of cash flows meet the different demands for information The income statement tells us how the firm has been operating to enrich the owners’ equity (looking at the results) The matching rule is applied for revenues and expenses; the accrual basis of accounting is used to measure the results of business activities The statement of cash flows concerns with the net cash flow generated from business activities 7/17/2006 Nguyễn Tấn Bình 3 Preparing the Statement of Cash Flows Direct Method Bo Ho Company Balance Sheet, December 31 (amounts in thousands) Current Assets 2004 2003 Current Debt 2004 2003 Cash 16 25 Payables 74 6 Receivables 45 25 Salaries Payable 25 4 Inventory 100 60 Total Current Assets 161 $110 Total Current Debt 99 10 Fixed Assets, Acc. Cost 581 330 Long-term Debt 125 5 Accumulated Depreciation(101) (110) Owners’ Equity 417 315 Fixed Assets, net 480 220 Total Assets 641 330 Total Debt & OE 641 330 Notes: During 2004, the firm liquidated some fixed assets for book values and received 10 in cash; it also paid dividends of 19 7/17/2006 Nguyễn Tấn Bình 4 Nguyen Tan Binh 2 Fulbright Economics Teaching Program Principles of accounting Lecture 4a 2005-2006 Direct Method Bo Ho Company Income Statement ($1000) December 31, 2004 Revenue $200 Expenses: Cost of Goods Sold 100 Salaries Expense 36 Depreciation Expense 17 Interest Expense 4 Total Expenses 157 Earnings Before Tax 43 Corporate Income Tax 20 Net Income $ 23 7/17/2006 Nguyễn Tấn Bình 5 Direct Method Bo Ho Company Statement of Cash Flows .