The following are summary cash transactions that occurred during the year for Hope Healthcare Company (HHC): Cash received from: Customers Interest on notes receivable Collection of notes receivable Sale of land Issuance of common stock Cash paid for: Interest on notes payable Purchase of equipment Operating expenses Dividends to shareholders Cash flows from investing activities Prepare the cash flows from Investing and financing activities sections of HHC's statement of cash flows. Note: Amounts to be deducted should be indicated with a minus sign. Net cash flows from investing activities Cash flows from financing activities $.660,000 12,000 100,000 40,000 200,000 Net cash flows from financing activities 15,000 120,000 440,000 30,000 4
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
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![Brief Exercise 4-12 (Static) Statement of cash flows; Investing and financing activities [LO4-8]
The following are summary cash transactions that occurred during the year for Hope Healthcare Company (HHC):
Cash received from:
Customers
Interest on notes receivable
Collection of notes receivable
Sale of land
Issuance of common stock
Cash paid for:
Interest on notes payable
Purchase of equipment
Operating expenses
Dividends to shareholders
Cash flows from investing activities
Prepare the cash flows from Investing and financing activities sections of HHC's statement of cash flows.
Note: Amounts to be deducted should be Indicated with a minus sign.
Net cash flows from investing activities
Cash flows from financing activities
$ 660,000
12,000
100,000
40,000
200,000
Net cash flows from financing activities
18,000
120,000
440,000
30,000
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