PREPARATION OF CASH

FLOW STATEMENT
(DIRECT METHOD)
ILLUSTRATION
FORMULA

Cash Receipts from Customers =

+ Net Sales
+ Beginning Accounts Receivable
− Ending Accounts Receivable
FORMULA
Cash Payments to Suppliers =
+ Purchases
+ Ending Inventory
− Beginning Inventory
+ Beginning Accounts Payable
− Ending Accounts Payable
FORMULA

Cash Payments to Employees =

+ Beginning Salaries Payable
− Ending Salaries Payable
+ Salaries Expense
FORMULA

Cash Payments for Purchase of Prepaid Assets =

+ Ending Prepaid Rent, Prepaid Insurance etc.
+ Expired Rent, Expired Insurance etc.
− Beginning Prepaid Rent, Prepaid Insurance etc.
FORMULA
Interest Payments =
+ Beginning Interest Payable
− Ending Interest Payable
+ Interest Expense
FORMULA

Income Tax Payments =

+ Beginning Income Tax Payable
− Ending Income Tax Payable
+ Income Tax Expense
CASH FLOW STATEMENT
(DIRECT METHOD)
ILLUSTRATION
CASH RECEIPTS FROM CUSTOMERS
NET SALES + A/R BEG. – A/R END + UNEARNED REVENUES
300,000 + 50,000 – 20,000 + 110,000 = 440,000

SCI COMPARATIVE SFP

ILLUSTRATION
CASH PAYMENTS TO SUPPLIERS
PURCHASES/COG+ INVTY. END – INVTY. BEG. + A/P BEG. – A/P END
50,000 + 50,000 – 10,000 + 10,000 – 30,000 = 70,000

SCI COMPARATIVE SFP

 ILLUSTRATION
CASH PAYMENTS TO EMPLOYEES
BEG. SALARIES PAYABLE – ENDING SALARIES PAYABLE + SALARIES EXPENSE
10,000 – 3 0,000 + 140,000 = 120,000

SFP SCI
 ILLUSTRATION
INTEREST PAYMENTS
BEG. INTEREST PAYABLE – ENDING INTEREST PAYABLE + INTEREST EXPENSE
3,000 – 1,000 + 10,000 = 12,000

SFP SCI
 ILLUSTRATION
INCOME TAX PAYMENTS
BEG. INCOME TAX PAYABLE – ENDING INCOME TAX PAYABLE + INCOME TAX EXPENSE
1,000 – 0 + 8,000 = 9,000

SFP SCI
 ILLUSTRATION
CASH FROM INVESTING ACTIVITIES
PROPERTY PLANT AND EQUIPMENT IN 2021 = 200,000
PROPERTY PLANT AND EQUIPMENT INCREASES IN 2022 = 500,000
THEREFORE, THE COMPANY INVEST ON PROPERTY PLANT AND
EQUIPMENT IN THE AMOUNT OF 300,000
 ILLUSTRATION
CASH FROM FINANCING ACTIVITIES
COMMON STOCK IN 2021 = 500,000
COMMON STOCK INCREASES IN 2022 = 600,000
THEREFORE, THE COMPANY HAS ISSUANCE OF COMMON STOCK
AMOUNTING TO 100,000