Change in accounts receivable for sales = sales on account in that period-cash received after sales
3. Cash payments payed after purchase is found out as given below
Change in accounts payable for purchase=purchase on account in that period - cash payed after purchase
4. Change in accounts payable/receivable for purchase/ sales, sales on account are found out from the various ledgers. Purchase on account can be derived directly from change in merchandise inventory and COGS if we assume that all purchases are on account.
5. If we assume all the purchase/sales are on account and the accounts receivable/purchases are only for sales and purchases, then we can find out the cash received/ payed after sale/purchases directly from the consecutive balance sheets and the income statement.
Accrued Liabilities( Wages, Salary, tax, interest)
Consider the following common transactions
Interest expense 5000
Interest payable 5000
Interest payable 2000
Here the cash out flow can be calculated as follows
Change in accrued liability = expense-cash
Prepaid expenses ( Rent, supplies, insurance)
Rent expense 2000
All the pre paid expense are paid totally with cash ( no point in being pre paid if there is any payable)
The cash out flow for pre paid expenses can be calculated as follows.
Change in prepaid expense = cash- expirations
Cash flow from operating activities can be calculated from the various methods as described above. The idea
is to find the cash flow directly, than deducing from the net income figure, as in the indirect method.