Chapter 16, Problem 15E

To determine

Concept Introduction

Cash Flow Statement: Cash Flow Statement is the statement reflecting the flow of Cash & Cash Equivalents.

Cash: It includes Cash in Hand & Deposits with Bank.

Cash Equivalents: It includes those investments which are short term investment and highly liquid i.e. maturity period is of three months or less.

Operating Activities: Operating Activities are the principal revenue generating activities of enterprise. In other words activities that are not financing and investing activities.

Sales: Sales includes the amount received from customer by selling the goods and services in the normal course of business.

Purchases: It is the amount spent for purchasing the goods meant to be resold.

Accounts Receivable: The amount receivable by the company for the sale of goods and services in the normal course of business. It is normally classified under current assets.

Accounts Payable: The amount paid against purchase of goods and services in normal course of business. It is normally classified as Current Liabilities.

Rules for T-Shape Account: As described above, the Amount received/paid can be calculated by preparing the T-Shape Account. The Rules for preparing the T-Shape Accounts is mentioned below:

Nature of Account	Debit Side	Credit Side
Asset Account	Increases	Decrease
Liabilities Account	Decreases	Increase
Revenue Account	Decreases	Increase
Expenses Account	Increases	Decrease
Capital Account	Decreases	Increase

To Calculate:

1. Cash Received from Customer
2. Cash Paid for Rent
3. Cash Paid for Inventory