May Transactions and Financial Statements
On May 30 Good Deal pays its accounts payable of $150. On May 31 Good Deal purchases office equipment (a new computer and printer) that will be used exclusively in the business. The cost of the office equipment is $1,100 and is paid for in cash. The equipment is put into service on May 31. There were no other transactions in May.
A balance sheet comparing May 31 to April 30 and the resulting differences or changes is shown below:
Let's review the cash flow statement for the five months ended May 31:
- The operating activities section starts with the net income of $300 for the five-month period. The increase in Inventory was not good for cash, as shown by the negative $200. Similarly, the increase in Supplies was not good for cash and it is reported as a negative $150. Combining the amounts, the net change in cash that is explained by operating activities is a negative $50.
- The increase in long-term assets is reported as (1,100) since it was a cash outflow of $1,100.
- There were no changes in short-term loans payable or long-term liabilities. There was a change in owner's equity since December 31, and as a result the financing activities section of the cash flow statement reports the owner's investment of $2,000 in the Good Deal Co.
- Combining the operating, investing, and financing activities, the statement of cash flows reports an increase in cash of $850. This agrees with the change in the Cash account as shown on the balance sheets from December 31, 2017 (or January 1, 2018) and May 31, 2018.
Download More Sample Statements of Cash Flows
Whether you are a business person or student of business, our Master Set of 87 Business Forms will assist you in preparing financial statements, financial ratios, break-even calculations, depreciation, standard cost variances, and more.