FAR – CASH FLOWS

This topic contains 5 replies, has 5 voices, and was last updated by  DM 5 months, 2 weeks ago.

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  • #2158051

    lmillan08
    Participant

    I am having a difficult time with Cash Flows. I am just not grasping the concepts, the questions, anything! I thought I understood it better when I listened to the Ninja PLUS Videos, but when I did MC questions, I was clearly wrong.

    Does anyone have any hints/tips on CFs? With my luck I will get a HUGE SIM on CF! lol

    #2158099

    Reinke0812
    Participant

    I made a username just to respond to this. I just passed FAR and have to tell you I hated cash flows. I felt like I just couldn't wrap my head around it. What ended up helping me get through it was that a I memorized “bad things are added, good things are subtracted”. For example, an increase in current liabilities I considered “bad” and knew to add it to net income. Depreciation is an expense, expenses are “bad”, add to net income. An increase in current assets, increasing assets are “good”, subtract from net income and so on. This might not be the best way but it is what got me through FAR a few weeks ago. After I had that down I built off of that. Good luck.

    #2158354
    Recked
    Recked
    Participant

    This was also one of my nightmare areas, and I knew if I gave up it would be on my exam.
    I probably spent a whole week going over this area multiple times to get it right.
    There are some useful videos on youtube and the Roger CPA website that I'd recommend you watch to help you get a handle on this.
    https://www.rogercpareview.com/lc/cpa-exam-videos/t-accounts-debits-and-credits-%E2%80%93-oh-my-preparing-statement-cash-flows

    Man, it's been a while since I heard that voice. That video brings back some memories/flashbacks.
    The method in this video is the one I took extra time to learn.

    Memento Mori - Kingston NY CPA & EA (SUNY Albany 2002)

    FAR-93 11/9/17 (10wks, 250 hrs, Roger 1800+ MCQs, Gleim TB 600+MCQs, SIMs)
    AUD-88 12/7/17 (3 wks, 85 hrs, Roger 1000 MCQs no SIMs hail mary)
    REG-96 1/18/18 (6 wks, 110 hrs, 1400 MCQs, no SIMs)
    BEC-91 2/16/18 (4wks, 90 hrs, 1240 MCQs)

    #2159644

    Hank Scorpio
    Participant

    What worked for me was using JE's for the conversions. You can start with NI as a Credit and plug some other numbers. I forget if it is cash to accrual (or the other way around) that is the opposite for balance sheet accounts. That really simplified it for me then I started getting 90% on my MCQ. The Operating/Investing/Financing you just have to know. Roger's does a great job explaining that part.

    AUD - 71, 79
    BEC - 69, 74, 75
    FAR - 71, 74, 80
    REG - 74, 78
    #2159701
    Recked
    Recked
    Participant

    Going through the actual T accounts and JEs helped me as well.

    Memento Mori - Kingston NY CPA & EA (SUNY Albany 2002)

    FAR-93 11/9/17 (10wks, 250 hrs, Roger 1800+ MCQs, Gleim TB 600+MCQs, SIMs)
    AUD-88 12/7/17 (3 wks, 85 hrs, Roger 1000 MCQs no SIMs hail mary)
    REG-96 1/18/18 (6 wks, 110 hrs, 1400 MCQs, no SIMs)
    BEC-91 2/16/18 (4wks, 90 hrs, 1240 MCQs)

    #2159911

    DM
    Participant

    The SOCF is a reconciliation from NI to ending cash. Converting NI to cash for accrual basis. We have to understand that under accrual basis, companies can record revenue/expenses BEFORE cash is transferred. So NI includes credit sales (receivables) and accrued expenses (AP) from operations. Under accrual, when cash is finally received/paid, the balance sheet is adjusted since PnL was already recognized before cash was received/paid. Therefore, we can impute the cash collection/disbursement by looking at the change in balance sheet for the period.
    A decrease in asset (AR) suggests that cash was collected – Add to NI.
    A decrease in liability (AP) suggests cash was paid – Subtract from NI.
    An increase in asset (AR) suggests an increase in uncollected cash revenue (inflating NI) – Subtract from NI.
    An increase in liability (AP) suggests an increase in unpaid cash expenses (deflating NI) – Add to NI.
    NI also includes non-cash transactions that impact the PnL, such as depreciation expense. We have to add back periodic depreciation expense to NI. This is similar to an increase in liability, except it is considered a contra-asset account (accum depr).

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