How Do You Prepare A Statement Of Cash Flows Determining The Firms Cash Position?
In order to prepare a statement of cash flows, you have to look back at the comparative balance sheets for XYZ company. From the two years of balance sheet data and some income statement data, you build your statement of cash flows. In this example, we will assume that net income is $110,500, depreciation is $50,000, and the firm pays out dividends in the amount of $65,000. The Statement of Cash Flows has three sections. The first section is Cash Flows from Operating Activities. Line 1 of this section is Net Income. To net income, add Line 2, which is depreciation. After taking net income and depreciation into account in the section for operating activities, you then consider any increases or decreases in your current asset and current liability accounts between the two years of balance sheet information. Looking at the balance sheets, accounts receivable, line 3, has increased from $170,000 to $200,
