How To Prepare Adjustment Entries For Cash Flow Statement

The sequence of cash flow statements is divided into three steps: one is to edit and adjust entries, the two is to make working papers (or to register T accounts), and the three is to prepare a formal cash flow statement based on working papers (or T accounts).

Adjusting entries is the most important step in these three steps.

Whether it is correct or not determines the correctness of the data in the statement of cash flow, and it is also the most difficult to understand and grasp.

This article intends to talk about its own views on related issues.

The purpose of compiling the entry is to compile the cash flow statement, and to grasp the cash inflow and outflow of the accounting entity's annual business activities, investment activities and fund-raising activities.

These contents must be analyzed from the accounting entity's whole year economic business.

The change of the accounting entity's annual economic business has been reflected in the number of items accumulated in the profit and loss account and the beginning and end of the items in the balance sheet.

Therefore, the annual cash inflow and outflow volume of the accounting entity are analyzed, starting from the cumulative number of income and loss accounts and the number of assets responsible for the current number of items in the current year (hereinafter referred to as the number of changes in each item in the two table).

No matter what content the project has caused (all of which are expressed in the balance sheet, the profit and loss account or the name of the items in the cash flow statement), it is indicated that it will be increased or reduced by borrowing or loan, and the total amount of the debtor is equal to the total amount of the credit.

That is to say, the analysis of the changes in the two table items is carried out through adjusting entries.

There are two purposes for preparing the adjustment entries: (1) to provide original data for the preparation of the cash flow statement.

Adjusting entries, through the specific analysis of the number of changes in each item of the two table, respectively indicate the cash inflow and outflow of various items of business activities, investment activities and fund-raising activities, so as to provide raw data for the compilation of cash flow statements.

This is the direct purpose of compiling adjustment entries.

(two) avoid mistakes.

Since the adjustment entry is to indicate the annual change of each item in the two table according to the exact lending relationship corresponding to the item of the report, it avoids the repeated calculation or no calculation of some contents, and calculates the number of changes at the beginning of each year after the work paper has been worked out.

This will ensure the accuracy of the final result.

Two, the compilation of adjustment entries should be divided into several distinct boundaries: first, draw a clear distinction between cash fluctuation and no cash change.

Because the ultimate goal of compiling phenotyping is to provide direct data for the preparation of cash flow statements.

Therefore, when analyzing the reporting items, we must draw a clear line.

(two) distinguish between different types of cash flows.

We should further distinguish the specific types of contents that cause cash changes in each item of the report.

That is, to distinguish cash flows from business activities, investment activities and fund-raising activities.

(three) distinguish the specific items of cash change.

The cash flow caused by each item should be further distinguished from the cash flow statement.

Three, do the basic work related to the adjustment of entries, although the adjustment entries are based on the analysis of the number of changes in the two tables, but not all items can be directly analyzed.

We need to combine the details of the subsidiary accounts.

Therefore, in daily accounting, enterprises should strengthen the accumulation of data needed for the cash flow statement, and create conditions for adjusting the entries smoothly.

There are two ways of accumulating: first, to set up the register for future reference; two, to set up the corresponding detailed account or to adjust the format of the current ledger page.

The author thinks that the business that can not happen frequently can be checked by the equipment, and the business that happens frequently requires second methods.

This paper introduces several methods of setting up fine ledgers.

A column is added to the ledger page.

Such subsidiary ledgers include: "management expenses", "manufacturing costs", "product sales expenses", "extra business income", "extra business expenses", "prepaid expenses", "withholding costs" and so on.

The necessary contents of adjusting entries should be added to the ledger page of these accounts.

For example, cash sales items must be included in the "product sales cost".

(two) add a subsidiary account under the general ledger account.

Such accounts include "financial expenses", "accounts receivable", "notes receivable", "accounts payable", "notes payable" and so on.

Among them, "financial expenses" should include three subsidiary accounts of "business activities", "investment activities" and "fund-raising activities".

The other four accounts should be added "two" detailed accounts of "goods", "taxes".

With these daily data, the compilation of adjustment entries at the end of the year is simple and feasible.