Statement of cash flows : It is one of the financial statement that shows the cash and cash equivalents of a company for a particular period. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financing activities of a company. Direct method: The direct method uses the cash basis of accounting for the preparation of the statement of cash flows. It takes into account those revenues and expenses for which cash is either received or paid. Cash flows from operating activities: Cash flows from operating activity represent the net cash flows from the general operation of the business by comparing the cash receipt and cash payments. Cash Receipts: It encompasses all the cash receipts from sale of goods and on account receivable. Cash Payments: It encompasses all the cash payments that are made to suppliers of goods and all expenses that are paid. The below table shows the way of calculation of cash flows from operating activities: Cash flows from operating activities (Direct method) Add: Cash receipts. Cash receipt from customer Less : Cash payments: To supplier For operating expenses Income tax expenses Net cash provided from or used by operating activities Table (1) Cash flows from investing activities: Cash provided by or used in investing activities is a section of statement of cash flows. It includes the purchase or sale of equipment or land, or marketable securities, which is used for business operations. The below table shows the way of calculation of cash flows from investing activities: Cash flows from investing activities Add: Proceeds from sale of fixed assets Sale of marketable securities / investments Deduct: Purchase of fixed assets/long-lived assets Purchase of marketable securities Net cash provided from or used by investing activities Table (2) Cash flows from financing activities: Cash provided by or used in financing activities is a section of statement of cash flows. It includes raising cash from long-term debt or payment of long-term debt, which is used for business operations. The below table shows the way of calculation of cash flows from financing activities: Cash flows from financing activities Add: Issuance of common stock Proceeds from borrowings Proceeds from issuance of debt Issuance of bonds payable Deduct: Payment of dividend Repayment of debt Interest paid Redemption of debt Repurchase of stock Net cash provided from or used by financing activities Table (3) To Prepare: The spreadsheet for statement of cash flows using direct method for NI Company for the year ended December 31, 2016:

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Chapter 21, Problem 21.3P

1.

To determine

Statement of cash flows: It is one of the financial statement that shows the cash and cash equivalents of a company for a particular period. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financing activities of a company.

Direct method: The direct method uses the cash basis of accounting for the preparation of the statement of cash flows. It takes into account those revenues and expenses for which cash is either received or paid.

Cash flows from operating activities: Cash flows from operating activity represent the net cash flows from the general operation of the business by comparing the cash receipt and cash payments.

Cash Receipts: It encompasses all the cash receipts from sale of goods and on account receivable.

Cash Payments: It encompasses all the cash payments that are made to suppliers of goods and all expenses that are paid.

The below table shows the way of calculation of cash flows from operating activities:

Cash flows from operating activities (Direct method)

Add: Cash receipts.

Cash receipt from customer

Less: Cash payments:

To supplier

For operating expenses

Income tax expenses

Net cash provided from or used by operating activities

Table (1)

Cash flows from investing activities: Cash provided by or used in investing activities is a section of statement of cash flows. It includes the purchase or sale of equipment or land, or marketable securities, which is used for business operations.

The below table shows the way of calculation of cash flows from investing activities:

Cash flows from investing activities

Add: Proceeds from sale of fixed assets

         Sale of marketable securities / investments

Deduct: Purchase of fixed assets/long-lived assets

              Purchase of marketable securities

Net cash provided from or used by investing activities

Table (2)

Cash flows from financing activities: Cash provided by or used in financing activities is a section of statement of cash flows. It includes raising cash from long-term debt or payment of long-term debt, which is used for business operations.

The below table shows the way of calculation of cash flows from financing activities:

Cash flows from financing activities

Add: Issuance of common stock

          Proceeds from borrowings

          Proceeds from issuance of debt

          Issuance of bonds payable

Deduct: Payment of dividend

              Repayment of debt

              Interest paid

              Redemption of debt

              Repurchase of stock

Net cash provided from or used by financing activities

Table (3)

To Prepare: The spreadsheet for statement of cash flows using direct method for NI Company for the year ended December 31, 2016:

2.

To determine

To Prepare: The statement of cash flows using direct method for NI Company for the year ended December 31, 2016

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KIARA LIMITED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER: ASSETS Property, plant and equipment (cost) Accumulated depreciation Long-term investments Inventory Accounts receivable Company tax paid in advance Bank EQUITY AND LIABILITIES 2024 2023 R R 2 490 000 1 620 000 (630 000) 660 000 1 050 000 1 230 000 30 000 (480 000) 450 000 1 290 000 900 000 0 750 000 660 000 5 580 000 4 440 000 Ordinary share capital 2 700 000 2 000 000 Retained income 1 500 000 1 158 000 Long-term loan from Kip Bank (15%) 900 000 1 000 000 Accounts payable 480 000 228 000 Company tax payable 0 54 000 5 580 000 4 440 000 ADDITIONAL INFORMATION All purchases and sales are on credit. Interim dividends paid during the year amounted to R150 750. Credit terms of 3/10 net 60 days are granted by creditors.

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