Accounting: The Language of Business - Vol. 2 (Intermediate: Part 83)

Many of the Kiwis appearing in powerful business circles around the world come from accounting backgrounds. Yet often people have preset ideas of how an accountant walks, talks, smells - although not in the business community. For me it is a career that offers a lot of variety and challenges and I love it.

Philip Roth

Statements of Financial Position and Cash Flows and the Annual Report (Part U)

by

Charles Lamson

EXAMPLE 6A.2 Operating Cash Flows: Direct Method

PROBLEM: Aries Endoscope, Inc. presents the following income statement and select balance sheet accounts. Prepare the operating cash flows section of the cash flow statement using the direct method.

 SOLUTION: Under the direct method, we compute each line separately, as follows. 

Aries has no taxes payable. Therefore, taxes paid must equal tax expense. The operating activities section of the cash flow statement is as follows: 

Notice that the net cash provided by operating activities under the direct approach ($202,090) is the same as the net cash provided by operating activities under the indirect approach in Example 6A.1 (from Part 81). 

*GORDON, RAEDY, SANNELLA, 2019, INTERMEDIATE ACCOUNTING, 2ND ED., PP. 305-306*

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