Chapter 3 Accrual Accounting Concepts 115Family Health Care’s other current liabilities consist of accounts payable, wages
payable, and unearned revenue.
Stockholders’ equityis the stockholders’ rights to the assets of the business. For a
corporation, the stockholders’ equity consists of capital stock and retained earnings.
The stockholders’ equity section of a classified balance sheet reports each of these two
financial statement accounts separately. The capital stock amount on the balance sheet
of $11,000 results from adding the additional investment during November of $5,000
to the beginning amount of capital stock of $6,000. The ending retained earnings of
$8,510 comes from the retained earnings statement.Statement of Cash Flows
The statement of cash flows shown in Exhibit 6 is prepared by summarizing the cash
transactions shown in the statement of cash flows column of Exhibit 2. The net cash
flow from operations is computed by adding the cash receipts from revenue transac-
tions and subtracting the cash payments for operating transactions. These items are
identified in the statement of cash flows column of Exhibit 2 as operating activities.
The cash received from revenue transactions consists of $9,700 ($5,500$4,200) re-
ceived from patients and $1,800 received from rental of the land. The cash payments
for operating transactions of $13,190 ($2,400$6,000$100$4,690) is determined
by adding the negative cash payments related to operating activities shown in the
statement of cash flows column of Exhibit 2. The purchase of the office equipment is
treated as a separate cash outflow from investment activities. The receipt of the addi-
tional investment and the payment of dividends are reported as cash flows from fi-
nancing activities.Exhibit 6
Family Health Care
Statement of Cash
Flows for November
Family Health Care, P.C.
Statement of Cash Flows
For the Month Ended November 30, 2007Cash flows from operating activities:
Cash received from patients $ 9,700
Cash received from rental of land 1,800 $ 11,500
Deduct cash payments for expenses (13,190)
Net cash flow used in operating activities $ (1,690)
Cash flows from investing activities:
Purchase of office equipment (1,700)
Cash flows from financing activities:
Additional issuance of capital stock $ 5,000
Deduct cash dividends (1,200)
Net cash flow from financing activities 3,800
Net increase in cash $ 410
November 1, 2007, cash balance 7,320
November 30, 2007, cash balance $ 7,730Integration of Financial Statements
Exhibit 7 shows the integration of Family Health Care’s financial statements for
November. The reconciliation of net income and net cash flows from operations is
shown in the appendix at the end of this chapter.