How to prepare cashflows

Question 1

Steps to prepare the operating activity section

Answer 1

start with net income and make 3 adjustments

1_ add back depreciation
2_ adjust for non cash gains and losses
3_ change in non cash current assets and liabilities
4_ mamke adjustments to net income

Question 2

Steps on how to prepare the investing activities section

Answer 2

Deals with buildings, equipment and land, usually it is [COST-ACC DEPR]+GAIN

Buildings: cash for building disposed- cash spent on building purchased

Equipment: cash for equpment disposed- cash spent on equipment purchased

Land: cash for land disposed- cash spent on land purchased

Question 3

Steps on how to prepare financing activities section

Answer 3

Issue of common shares
repurchase of common shares (negative)
Dividends paid (negative)

Bank loan payable:
Begin balance (add current and non current portions)
End balance (add current and non current portions)
Net Increase/Decrease value

(not complete)

Question 4

how to check your calculations of the financing activities section?

Answer 4

check it in the cash t account

-find begin balance
-what is the ending balance of cash (CAREFUL!!! THIS IS THE BANK OVERDRAFT, AND THIS IS SHOWN IN THE CURRENT LIABILITES SECTION