财务基础知识3

1FinancialStatementPreparationLearningObjectives:Understandtheclosingprocessanddevelopanabilitytoprepareastatementofcashflowsfromacomparativebalancesheetandincomestatement.DiscussionSection#3FinancialReporting-E202LopoMartinezFrameworkforAdjustmentsPrepaidExpensesDepreciationUnearnedRevenuesAccruedExpensesAccruedRevenuesAdjustmentsAnadjustingentryisrecordedtobringanassetorliabilityaccountbalancetoitsproperamount.Transactionswherecashispaidorreceivedbeforearelatedexpenseorrevenueisrecognized.AdjustingAccountsattheendoftheAccountingPeriodTransactionswherecashispaidorreceivedafterarelatedexpenseorrevenueisrecognized.COGS:CostofGoodsSoldBeginningInventoryMerchandisePurchasesorCostofGoodsManufacturedGoodsAvailableforSale=+Needstobeallocatedbetween:EndingInventoryCostofGoodsSold+-=BeginInventory(known)Purchases(known)EndingInv(known)COGS.(solvedfor)SoyoucanestimateCOGS:TheClosingProcessAssets,LiabilitiesandOEarepermanentaccountsnotclosedtoazerobalanceattheendoftheaccountingperiod.Theseaccountsarecarriedforwardtothenextperiod.RevenuesandExpensesaretemporaryaccountsthatareclosedtoazerobalanceattheendofeachaccountingperiod.Closingentriesreducealltemporaryaccountstoazerobalance.RevenuesBal.xxxRetainedEarningsBeg.Bal.xxxRevenuesTheClosingProcess–SingleEntryxxxExpensesBal.xxxxxxExpensesEnd.Bal.xxxRetainedEarningsisaOEaccountandalwayscarriesabalance.NetIncomefortheperiodisdeterminedbythesetwoentries.RevenuesBal.xxxIncomeSummaryRevenuesTheClosingProcess–UsingIncomeSummaryxxxExpensesBal.xxxxxxExpensesBeg.Bal.xxxxxxBal.xxxEnd.Bal.xxxNetIncomeRetainedEarnings(1)(1)(2)Howdidthebusinessfunditsoperations?Didthebusinessborrowanyfundsorrepayanyloans?Doesthebusinesshavesufficientcashtopayitsdebtsastheymature?Didthebusinessmakeanydividendpayments?ImportanceofCashFlowsStatementCurrencyShort-term,highlyliquidinvestments.Readilyconvertibleintocash.Sonearmaturitythatmarketvalueisunaffectedbyinterestratechanges.CashorCashEquivalentsComponentsoftheStatementofCashFlowsCashreceivedfromsaleofgoodsandservicesCashpaidforoperatinggoodsandservicescashflowfromoperationsOperations-=CashreceivedfromsalesofinvestmentsandPP&ECashpaidforac-quisitionofinvest-mentsandPP&EcashflowfrominvestingInvesting-=CashreceivedfromissueofdebtorcapitalstockCashpaidfordividendsandreacquisitionofdebtorcapitalstockcashflowfromfinancingFinancing-=Netchangeincashfortheperiod=+-+-DCash=DLiabilities+DOE-DNoncashAssetsThechangesincashcanbedeterminedbyanalyzingthenoncashaccountsonthebalancesheet.AnalyzingNoncashAccountsDCash+DNoncashAssets=DLiabilities+DOEAnychange(D)inanoncashitem(liability,OEorasset)mustbeaccompaniedbyachangeincash.Assets=Liabilities+Owners’EquityCash+NoncashAssets=Liabilities+Owners’EquityInvestingActivitiesCashFlowfromInvestingTransactionsthatinvolveacquisitionordisposalofnon-currentassetsInvestingActivitiesAdd:Proceedsfromsaleofland,buildings,equipment,orothernoncurrentassets$XXXReceiptofprincipalpaymentsfromdebtorsXXXLess:Paymentstoacquireland,buildings,equipmentorothernoncurrentassetsXXXPaymentstolendcashXXXNetCashFlowsfromInvestingActivities$XXXFinancingActivitiesCashFlowfromFinancingTransactionsinvolvingreceiptsfromorpaymentstocreditorsandshareholdersFinancingActivitiesAdd:Proceedsfromborrowings$XXXProceedsfromissuingsharecapitalXXXProceedsfromsaleofbondsXXXLess:PrincipalpaymentsonborrowedfundsXXXPaymentsrelatedtobondmaturitiesXXXDividendpaymentsXXXNetCashFlowsfromFinancingActivities$XXXOperationActivitiesCashFlowfromOperationsCashpaymentsforoperationsCashreceiptsfromoperationsNetincomeAdjustmentsfornon-cashrevenuesandexpensesAdjustmentsforreceivables,inventories,payables,othercurrentassets/liabilitiesCashflowfromoperationsLessPlus/LessPlus/LessEqualsEqualsDirectMethodIndirectMethodIndirectMethodOperatingActivitiesNetIncome$XXXAdd:Decr.inCurrentAssetsXXXIncr.inCurrentLiabilitiesXXXAmortizationExp.XXXNoncashLossesXXXLess:Incr.inCurrentXXXAssetsDecr.inCurrentLiabilitiesXXXNetCashFlowsfromOperatingActivities$XXX•Reconcilesaccrualnetincomewithcashflowsfromoperations•Adjustmentstonetincomeinclude:–Amortizationexpense–Gainsandlosses–Changesincurrentassets–ChangesincurrentliabilitiesChangeinAccountBalanceDuringYearIncreaseDecreaseCurrentSubtractfromnetAddtonetincome.Assetsincome.CurrentAddtonetincome.SubtractfromnetLiabilitiesincome.MEASURINGCASHADEQUACYFREECASHFLOW•Freecashflowistheamountofcashavailablefromoperationsafterpayingforplannedinvestmentsinplant,equipment,andotherlong-termassets(nofinanceactivities).FreeCashFlowCashFlowfromOperationsCashFlowfromInvestingActivities=+FreeCashFlow=+DepreciationDNoncashWKNetIncome--NetCapitalExpendituresUndersimplifyingassumptions:DCash=DLiabilities+DOE-DNoncashAssetsP-4.26a)JAN1DEC31BalanceSheetChangeCashforOperationsCashforInvestingCashforFinancingCash12,000$15,000$Accountsreceivable144,000156,000$12,000($12,000)Inventories190,000210,00020,000(20,000)PPE700,000775,00075,000($75,000)Acc.Depreciation(246,000)(325,000)(79,000)79,000TotalAssets800,000$831,000$LiabilitiesandOEAccountspayable190,000$165,000$(25,