Indirect Cash Flows Example

Practice, practice, practice! Try pausing the video first to and attempt to complete this indirect cash flow statement yourself before you watch. To access a follow-along spreadsheet and more practice, click here: tlctutoringcom...
For more accounting help, visit our website at www.tlctutoringcompany.com!
Please leave your questions in the comments section below.

[@blueviolets2106]

Every time I take it test or quiz feeling like I know this stuff I still end up getting parts of it wrong. This video is the most clear on KZbin and uses the most realistic accounts/scenarios in terms of quiz/test material. Got my first 100% on a cash flow statement yesterday. Thank you for your help

[@dh1713]

Congrats, bro I hope you are doing well with accounting now (:

[@josephg.eokello794]

Finally, a cashflow statement video that makes sense! You're the best

[@solidtvgameplay9869]

You just saved me from the day before my financial accounting exam thank you

[@ryoung5481]

Love how she explains this. Using this video to make it through my online accounting course and am going to share it with my teacher.

[@jayminpatel4790]

THIS VIDEO SAVED MY LIFE....If only my prof would teach like this

[@alyakblu3]

This video just saved my life

[@Ksm_Mishu]

alyakblu3 really??are you accounting student??

[@esmirnadiaz9223]

same

[@이남학-g8q]

나도 좋아요 Me too

[@irmulc]

I have been struggling with this for two days. I finally got my assignment to add up.... THANK YOU!!!!!!!!!!

[@carylrailwah7917]

THIS VIDEO IS THE REASON I PASSED MY EXAM !

[@accountinghelp]

Woo! Good work!

[@Ksm_Mishu]

Caryl Railwah lets have a party ..my exam gonna be held tomorrow 😞😞😞

[@richiedesigns2683]

Loving how you simplify the stuff

[@sagea2042]

Literally saved me from a failing grade. Thank you soooooooooo much.

[@tochukwuudu7763]

God bless u ive got papers in a couple of hours,and now i fully understand indirect cash flows

[@NHasan-jmskik007]

Thank you so much for the amazing tutorial. It was really helpful.

[@kimberlysweeney1338]

THANK YOU!!!!! I have been so confused on how to calculate depreciation expense when there is no disposal of equipment. Thank you, thank you, thank you!

[@accountinghelp]

I am so happy we could help, Kimberly!

[@supermuxiong]

Thank you! Superb presentation, easy to follow.

[@accountinghelp]

My pleasure! Happy studying!

[@heyjudees]

This video just saved my life! Thank you!!

[@lisamccray6481]

The "CHANGE" column. Life Saver. 😎.

[@aaronhornanfinance-bu8ft]

can you please do a direct cash flow example? your examples are clear and brief and they are the most helpful imho

[@johnc8627]

So simply explained, excellent video

[@MuhammetKenan]

Perfectly explained. Thank you.

[@kane5202]

I love this channel it helped me out a lot. Thank you

[@jimmymwikisa6117]

👍amazing video, made a lot of things easy

[@tryingareo1734]

You are my savior! Thank you so much!!!!

[@lynnstanwood5673]

Excellent Instructor!

[@numbersguy58]

EXCELLENT lesson! You are a great teacher. I appreciate your detailed presentation. Best I've seen on KZbin. Plus your voice is so pleasant to listen to. I am in a nonprofit organization. We do not have stock but do have restricted gifts. Do changes to restricted cash go in the section on financing activities? Do i just record the increase or decrease in cash that is not unrestricted? Anything else nonprofits need to include in their statement of cash flows?

[@accountinghelp]

I am glad we were able to help! My background is only in for profit organizations, but I looked up some resources for you: www.accountingcoach.com/nonprofit-accounting/explanation/4 www.picpa.org/articles/picpa-news/2017/11/30/restricted-cash-and-the-statement-of-cash-flows

[@numbersguy58]

Thanks

[@carlitobrigante4999]

Jesus, i just learned more about the statement of cash flows in that 15 minute video than I did behind a class for hours. Seriously, straight to the point, and great tips with the abbreviations and general rules. Do you have online classes about accounting besides on youtube?

[@accountinghelp]

We are in the process of rolling out a website to compile everything. Stay tuned! ;)

[@carlitobrigante4999]

@@accountinghelp wow please keep us posted!!

[@chantelzemp2534]

Such a great explanation. Thank you for this video!!

[@gisellepietersz458]

Amazing!!! Could you put an example with a disposal of an asset??

[@DKendrick1]

Great video! Very straight forward and helpful!

[@martymcfly002]

Very good teacher, thanks!

[@Ethan-sz9hv]

Awesome video!! Thank you!

[@theicewizard7051]

Damn this video really helped me learn cash flow

[@rizqinabila-t1o]

Thank you, great explaination.

[@britbaber603]

Thank you, that helped my understanding very much. Could you provide a video on a real companies cash flow statement?

[@undervalueds]

thanks - that helped a lot going through this :)

[@miroovvv]

great video, thanks for uploading it, you are a hero

[@UNIQUEONE-eb8zs]

MY HERO!!!!!!!!!!!!!

[@phoneblabla9336]

This video is very help to me.. thanks

[@possessedbychangmin3835]

this is very helpful, thank you!

[@Yolanda-tw4dh]

can't love it more... lifesaver!

[@jaiyash12]

Assom madam really helping mi lot

[@sindbad022]

you have good voice 😇

[@paolovargas5148]

goodmorning, may I ask something? if there is unrealized gain in sale of trading securities? what will happen?

[@nasm27]

How about bank overdrafts? How do we treat them in the statement of cashflows?

[@akoriosnr6267]

I'm grateful! Thanks a lot.

[@yellowberrypie]

Much more helpful than my professor lol

[@cedricopay9869]

Thank you so Much, Please do more videos about the further continuation of these accounting topics

[@angelali6117]

really helpful, hope to have more related practice!

[@juanka96jv]

This was brilliant! Cheers

[@riky2107]

the "gain on sale of investment" should be negative, because the gain was already recorded on the income statement, therefore, we should subtract it. if it is not the case pls explain THANK YOU

[@benedictlego6642]

very well explained !MY!

[@InfernoFang929]

wow this video was so helpful ty :D

[@rinreborn7364]

this is pretty easy to understand but then my homework is 10x harder than this, so sad. There are more thing here didnt cover

[@zohaibahmed6863]

To the point video 🖒

[@yvonnemukase8019]

Awesome!

[@mjaneesmundo5227]

hi, wondering if i could make a cash flow indirect method from direct method?

[@nishantbhargava9007]

What should I use retained earning or the profit from the income statement for the net income?

[@michaelsamiotis2014]

Thank you for your video. Just one question please. Shouldn't the net income figure be equal to the difference of the retained earnings between the preceding and current year? Thank you

[@accountinghelp]

The change in retained earnings during a period is net income - dividends declared.

[@michaelsamiotis2014]

@@accountinghelp Amazing, it makes sense now to me as 38300 earnings - 50000 dividends = 11700 which is what is shown on the statement of financial position. Thank you very much

[@congchuaOritap14]

Is there a mistaken number of the change of depreciation? It should be minus 8000 right

[@accountinghelp]

Not quite. Depreciation expense always gets *added*. This is because we are starting with net income, which has already deducted out the depreciation as an expense. However, this is a cash flow statement, and since depreciation expense is not cash related, we add it back. :)

[@congchuaOritap14]

@@accountinghelp thank you :)

[@HUMAN-VERSION4]

Thank u ❤

[@pgmredstone]

11:13 correct me if i'm wrong but i think you made mistake there, added issuance of stock should be 25k instead of 45k, they already had 20k in shares outstanding

[@undervalueds]

You've also got to look at the paid in capital so in total $45k stock was issued and received in cash

[@pgmredstone]

@@undervalueds amount of common stock for previous year was 20k, 45k was the share capital balance of the year after. shouldn't it be (45-20=) 25k instead?

[@accountinghelp]

Think about the journal entry that is used when we issue common stock: Cash (Dr.) Common Stock (Cr.) Paid-in capital in excess of par (Cr.--or occasionally debit) In this case, common stock increased by 25,000 yes, but as @Undervalued S said above, you *must* also look at paid-in capital. During the period, paid-in capital increased by $20,000. That means that the total cash we must have received for this issuance was $45,000. Here is the journal entry to show how it would look from the double-entry side of things: Cash Dr. 45,000 Common stock Cr. 25,000 Paid-in capital in excess of par Cr. 20,000 Keep in mind that this is a statement of cash flows--we want to know how much we received in *cash* for issuing that stock and that will be the sum of the change in common stock and the change in PIC. :)

[@0040ahmed]

Very good

[@greenbluepink1]

You should make video on longterm liabilities in relation to bonds

[@emebetgashaw760]

Thank you so much !

[@JithuReddy92]

thankyou very much. very useful

[@vedsharma3672]

i followed

[@adriana_c3109]

what do you do with a loss or gain on the sale of equipment, land, or other investments? Thanks!

[@accountinghelp]

Hello Adriana, loss and gains on PPE and other investments are handled the same way as regular investments. The cash received is listed as an increase under the investing section, and the gain (or loss) is deducted (or added if it is a loss) in the operating section. Go to minute/second marker 5:50 to see this in action! :)

[@thamnguyen7017]

why are losses added in cash flow ? thank you

[@Salvation1984]

I am confused about one thing; There is a change of 25,000 in our Stocks, we started at 20,000 and ended at 45,000. Why are we cataloguing the FULL ending balance of stocks issued and not the change, since the change represents the inflow of cash from the issuance of stock, and the 45,000 is the ENDING of our cash inflow of our stock?

[@accountinghelp]

Stock + APIC change

[@bimbipilla]

A decrease in A/P, does it mean that we are due to them or have we paid them?

[@accountinghelp]

If accounts payable decreases during the period, it means that we paid off more accounts payable that what we incurred during the period.

[@MuhammadShabbir-bk1db]

While checking how adding all 3 end up have 6000 as a result?

[@Kejfnsnsmsksk]

THANK YOU. Thank you.

[@uthmanajia9577]

What if there’s a decrease in accumulated depreciation?? Would it be deducted instead added?

[@accountinghelp]

Not quite. If accumulated depreciation is going down, that means that we sold equipment. Keep in mind that it isn't the accumulated depreciation that we are adding, it is actually the depreciating expense, which in this case is reflected in accumulated depreciation simply because we did not dispose or sell equipment. To determine the actual depreciation expense during the year if there is a disposal or sale of equipment, try plugging the following formula for depreciation expense: beginning accumulated depreciation balance + depreciation expense - accumulated depreciation removed for the year due to disposals or sales of equipment = ending accumulated depreciation balance.

[@Sourav00Niloy]

Thanks mam

[@iynur]

Hi thank you for the video, just a quick question...for that dividends. If we're not paying anything in this year, it's shud be 500,000+700=50,700, then we paid 200 so that at the end of the year there's only 500 payable left. So shudn't it be 50700-200 instead of -500? I don't really understand why substracting 500 instead of 200? thanx...

[@accountinghelp]

Hello Iynur, If we did not pay any cash dividends for the current year, then the dividends paid would be 0. It may help to think of it this way. At the beginning of the year, we owed $700 in dividends. During the year, we declared an additional $50,000, which brings our dividends payable balance to $50,700. However, at the end of the year, we see that we only have a $500 balance in dividends payable. That means that we paid: $50,700 (previous balance) - $500 (final balance) = $50,200. Remember that the dividends payable balance *decreases* when we pay dividends and that dividends payable are essentially "dividends owed". Does this help? :)

[@iynur]

TLC Tutoring thanks for the reply, it’s very helpful! Sorry that I found another question when I was reviewing this. I noticed that you directly deducted purchase of land and equipment(I understood this as pp&e) under cfi. When I was doing the whole thing i deducted Capex(in this case158,000+60,000-102,000+8,000=12,400)under cfi...there’s a difference of depreciation between Capex and pp&e so I’m really confused when I should deduct pp&e and when i should deduct Capex? Cuz once we deducted Capex, there seems no need to record pp&e under cfi as well? Thannnnnks!!!!

[@michael.GX777]

When I use preceding retained earnings add net income deduct dividends paid is not equal to current year retained earnings. 57,800 + 38,300 - 50,200 = 45,900 There is 200 difference with current year retained earnings.

[@accountinghelp]

There is an error in your formula. We do not deduct dividends paid. You must deduct dividends *declared*. Beginning retained earnings + net income - dividends declared = ending retained earnings 57,800 + 38,300 - 50,000 = 46,100

[@chrispriveco]

I was born and raised in Detroit, and I can confirm that nobody here likes gangrene.

[@mahmoudmohamed7557]

if give me Notes Payable where i put it ? in financing statement of cash flow or operating statement of cash flow :) Thank you for your great effort

[@accountinghelp]

If we are *receiving cash* and giving a note payable, that would be an add under the "Cash Flows from Financing Activities" section.

[@jeffreyrodriguez6801]

That 8000 change in accumulated depreciation needs parentheses (8000)

[@accountinghelp]

No, it does not. Accumulated depreciation increased during the period, and since that column tracks increases/decreases, the parentheses are removed to show that it increased.

[@leonardoda-vinci7989]

THANK YOU!!!!!

[@mahix4442]

if a question includes a disposal of a non-current asset, how would I calculate the depreciation?

[@accountinghelp]

The change in accumulated depreciation during the year + accumulated depreciation of the asset being disposed.

[@mahix4442]

@@accountinghelp Thankyou! Also, I had a question where I was only given a statement of financial position and not a profit or loss statement. How would I calculate the profit before tax in this situation? (the answer did not show the working)

[@nasm27]

Please, can anyone explain to me the "why's" behind the increase and decrease on the Adjustment on Working Capital. I know how it is done but I just don't understand why it is done.

[@accountinghelp]

I think that the easiest way to understand the why behind these adjustments is to analyze two accounts. The first one is accounts receivable. If accounts receivable went down from one year to another, that means that we received more cash than sales were added. Which is why when accounts receivable goes down, we would add to net income in our adjustment. For accounts payable, if accounts payable goes down, that means that we paid off more than what we added to it, which is why when accounts payable decreases it would be a negative adjustment. Current assets move in the opposite direction, while current liabilities move in the same direction.

[@nasm27]

@@accountinghelp Thankyousomuch! i understand it better now. 🤍

[@ndayizeyetheobard463]

Our mummy

[@TheSklfhal]

Thank you!

[@John-dg9qe]

thank you !!!!!!!!

[@dputrazz7744]

Ilovethis

[@DuK-2102]

Fuck my life I found this 2 hours before my exam. Too late to get it all

[@accountinghelp]

Hope you did well on your exam!

[@vikrantarora5433]

$ 25,000 gain on sale of the investment is already included in the Net income. So, we can just adjust for the sale of the investment for $ 70,000. Why do we have to deduct the $ 25000 from the operating section and then add back the whole amount of $ 95,000 in the investment section?

[@accountinghelp]

It is the section of the cash flow statement that is important. The operating section is just supposed to show the cash flow from general operating activities. Gains and losses are not operating activities. Since the gain is already included in the net income, we deduct it back out to reconcile it back to operating. Then we show the cash inflow from the sale of the investments in the investing section so that we can accurately depict the investing cash flows.

[@vikrantarora5433]

@@accountinghelp Thanks for the explanation.

[@nurdinamohdsuhaimi7202]

Thank you so much for this video .. can i ask ? How to calculate the purchase of non-current asset if there is deficit or surplus in fair value and the asset was disposed ?

[@pthdxe]

can you share your excel file for practice?

[@dutaigoi8356]

Thanks.

[@TheMaaz32]

The change in issuance of stock is 25k but you put the current year's value! Aren't we supposed to put the change there?

[@accountinghelp]

When you issue common stock, you need to remember that the change in cash is equal to 1. The change in the common stock account 2. The change in the paid-in capital account 25,000 + 20,000 = 45,000

[@SparkyWaxAll]

thanks

[@shwalnendare6991]

Please can you enlarged it

[@mzchriztinah]

Thank you so much. What if there was disposal, how would the accumulated depreciation and depreciation expense be calculated?

[@mzchriztinah]

And also, would the disposal be added into operating activities or the difference in disposal and carrying value?

[@accountinghelp]

Hello Adaeze, for disposals, we would have to take into account any changes in accumulated depreciation due to write offs of accumulated depreciation for disposal. For example, let's say that accumulated depreciation went up by $3,000 during the year. Let's also assume that we disposed a piece of equipment that had accumulated depreciation of $500. Then our depreciation expense for the year (and the amount going into our cash flow statement) would be 3000 + 500 = $3,500. This will take into account the depreciation expense for the equipment still remaining and also taking into account the depreciation related to the equipment disposal.

[@mUrAleeTV]

Issuance of stock is 25,00

[@mUrAleeTV]

25,000

[@accountinghelp]

Issuance of stock is 45000. The amount received for an issuance of stock is equal to the increase in common stock and paid-in capital in excess of par.

[@xinyiyi1426]

Cell E9 (Change in Accumulated Depreciation) is wrong, should be (8000) instead of 8000

[@accountinghelp]

Xinyi, accumulated depreciation is a contra asset account, so it *takes away* on the balance sheet. As you know, a negative number going further into a negative number might seem like it is a decrease, but think of it this way.... What would make accumulated depreciation go down? We would have to have sold some equipment. However, we know for a fact that they did not dispose of any equipment. Any change in accumulated depreciation therefore would be an increase for the recording of depreciation of equipment during the period. This is a very common error that I see with students, especially when they are trying to do things like analyze a change in contra accounts. Do not rely on simple math rules. Really THINK about what is happening in the big scheme of things. :) In this period, accumulated depreciation went *up*.

[@mariajauslin1107]

Why dont we just look at the balance of each account for the current year and work with these values, instead of comparing it with the previous year.

[@blueviolets2106]

Because to determine the cash inflows and outflows you have start with the ending balance of the previous year to see the differences and transactions made in each account

[@mariajauslin1107]

@@blueviolets2106 Thank you for your answer. Could you please make a video and give an example, whereby the acc.depreciation has decreased compared to the last year.

[@blueviolets2106]

@@mariajauslin1107 In the statement of cash flows, Depreciation is always ADDED back to net income. When you calculate the difference between the 2 years, that number will be added back to net income

[@mariajauslin1107]

@@blueviolets2106 Thank you for your answer. I had this exercise at the university www.quora.com/Depreciation-and-Cash-flow and I still cannot understand how much I should add to the net income. I would be really grateful if you could help me solving this problem. I am only interested on the acc. depreciation and not the whole balance sheet. Please help me. Thank you in advance. I can also tell you how much we added in case you want to know in advance.

[@willyputra1567]

Can i get your excel file?

[@Fabfest864]

Thanks