To reconcile beginning and ending cash balances: Step 4: Reconcile Total Net Cash Flows to Change in Cash Balance during the Period Step 3: Present Net Cash Flows from Financing Activitiesįinancing net cash flow includes cash received and cash paid relating to long-term liabilities and equity. Investing net cash flow includes cash received and cash paid relating to long-term assets. Step 2: Determine Net Cash Flows from Investing Activities Adjust for changes in current assets and liabilities to remove accruals from operating activities.Remove the effect of gains and/or losses from disposal of long-term assets, as cash from the disposal of long-term assets is shown under investing cash flows.Add back noncash expenses, such as depreciation, amortization, and depletion.
Begin with net income from the income statement.Using the indirect method, operating net cash flow is calculated as follows: Step 1: Determine Net Cash Flows from Operating Activities The statement of cash flows is prepared by following these steps:
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