Chapter 4 Accounting Information Systems 175
Cash Flow Activity
Increase (Decrease)
Operating Investing Financing
Date Transaction Description Activity Activity Activity
Nov. 1 Issued capital stock $25,000
5 Purchased land $(20,000)
18 Earned cash fees $7,500
30 Paid $3,650 for:
Wages (2,125)
Rent (800)
Utilities (450)
Miscellaneous (275)
30 Paid creditors on account
for supplies (950)
30 Paid dividends (2,000)
Dec. 1 Paid insurance premiums (2,400)
1 Paid rent (800)
1 Received cash for renting land 360
6 Paid for adverstisement
(misc. expense) (180)
11 Paid creditors on account
for supplies (400)
13 Paid employee wages (950)
16 Earned cash fees 3,100
20 Paid creditors on account for office
equipment (1,800)
21 Received cash from customers on
account for fees earned 650
23 Paid for supplies (550)
27 Paid employee wages (1,200)
31 Paid telephone bill
(utilities expense) (310)
31 Paid electric bill
(utilities expense) (225)
31 Earned cash fees 2,870
31 Paid dividends (2,000)
Totals $2,865 $(21,800) $21,000
The statement of cash flows can be prepared from the preceding analysis by grouping
the cash receipts and payments for each of the cash flow activities. The resulting state-
ment for Online Solutions is shown in Exhibit 17.
You should note that the net cash flows from operating activities of $2,865 is not
the same as the net income of $7,205. As discussed in Chapter 3, this difference is due
to the effect of accruals and deferrals on determining net income under the accrual
basis of accounting. In the appendix to Chapter 3, we showed how the net cash flows
from operations can be reconciled with net income. This reconciliation is illustrated in
Exhibit 18 for Online Solutions.