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So far I got the net cash flow 246800 and I have no idea where I went wrong
I'm having a problem with this question can anyone help me
- Thread starter Libyan accounting student
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So far I got the net cash flow 246800 and I have no idea where I went wrong
Counterofbeans
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The key to executing a good SOFC is to use a good template. I'd die if I didn't use/review it in Excel. And I've yet to see a single ERP, including SAP, Oracle or Microsoft 365 solve that riddle. It's just too difficult and/or cumbersome for a system to easily calculate.
Don't be afraid, this $hit is easy. People like to make this sound like it's harder than it actually is. Overwhelmingly, it's not. It's just math to get to balance and getting it correct isn't generally too terrible.
Oversimplified, across the top of the Excel file, say Row 1, put the entire balance sheet for 2020, with assets as positive numbers and liab/equity as negative numbers. The sum the balance sheet. Obviously, that should balance to zero. Do the same thing for 2021 in, say, Row 2. Then, in row 3, do the difference between 2020 and 2021 balances. These are the amounts that need to be explained in the SOCF. Think of it as this: "All of these changes are cash related unless I tell the file differently."
In row 5 (or whatever) start the SOCF, beginning with Net income. Then just list whatever is in the book/example SOCF, like depreciation/amortization, provision for losses on receivables, income from unconsolidated subsidiaries, etc. Note that these typically represent adjustments to net income that were noncash, like depreciation. That lowered net income, but needs to be added back to net income, as that's a JE.
Next are changes in operating assets and liability accounts. I almost always start by using a formula, in the appropriate line, that's just =-[difference] of the row you are in. Say it's prepaid expenses and other current assets as the financial statement line item. As long as you are in the row of prepaid expenses and other current asset change, just go over to the column that has the difference between the PY and CY and have that cell equal the exact, negative, difference of the change.
Do the same thing for investing and financing activities. Ultimately, all the negative balances balance all of the changes, which means, by definition, your SOCF balances. It might not be correct, but you have the starting point. Most typically use a formula across the very bottom of the SOCF that goes to zero, which means that all changes have been accounted for.
Lastly, you walk through each change they/the problem gives you, which details how much is cash vs. noncash, or by section of whatever.
It's hard to do here in this post, but the point is that an Excel template here is key. It's used at all firms I've seen and is used by all the Big-4 firms as well. Any questions, let me know
Don't be afraid, this $hit is easy. People like to make this sound like it's harder than it actually is. Overwhelmingly, it's not. It's just math to get to balance and getting it correct isn't generally too terrible.
Oversimplified, across the top of the Excel file, say Row 1, put the entire balance sheet for 2020, with assets as positive numbers and liab/equity as negative numbers. The sum the balance sheet. Obviously, that should balance to zero. Do the same thing for 2021 in, say, Row 2. Then, in row 3, do the difference between 2020 and 2021 balances. These are the amounts that need to be explained in the SOCF. Think of it as this: "All of these changes are cash related unless I tell the file differently."
In row 5 (or whatever) start the SOCF, beginning with Net income. Then just list whatever is in the book/example SOCF, like depreciation/amortization, provision for losses on receivables, income from unconsolidated subsidiaries, etc. Note that these typically represent adjustments to net income that were noncash, like depreciation. That lowered net income, but needs to be added back to net income, as that's a JE.
Next are changes in operating assets and liability accounts. I almost always start by using a formula, in the appropriate line, that's just =-[difference] of the row you are in. Say it's prepaid expenses and other current assets as the financial statement line item. As long as you are in the row of prepaid expenses and other current asset change, just go over to the column that has the difference between the PY and CY and have that cell equal the exact, negative, difference of the change.
Do the same thing for investing and financing activities. Ultimately, all the negative balances balance all of the changes, which means, by definition, your SOCF balances. It might not be correct, but you have the starting point. Most typically use a formula across the very bottom of the SOCF that goes to zero, which means that all changes have been accounted for.
Lastly, you walk through each change they/the problem gives you, which details how much is cash vs. noncash, or by section of whatever.
It's hard to do here in this post, but the point is that an Excel template here is key. It's used at all firms I've seen and is used by all the Big-4 firms as well. Any questions, let me know
Might be too late, but it should look like this. If you compare this to yours you'll see which numbers you need to revisit.
