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April 24, 2026, 12:13:59 pm

Author Topic: Prepaids in a Cash Flow Statement  (Read 806 times)  Share 

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Flying Emu

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Prepaids in a Cash Flow Statement
« on: September 21, 2012, 08:22:02 pm »
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Was wondering if anyone could help explain to me how to record a prepaid into a cash flow statement. I know it fits under Operating Activities, but I have no idea of the rest:

Quote
... She recently took our a cleaning contract with Wizard Window Cleaners at a cost of $90 per month.
On 1 November 2004 Mason paid Wizard Window Cleaners in advance for a six month contract.
Balance day for her business is 31 March each year.

A) State the amount that would be reported in the Cash Flow Statement in relation to the cleaning contract.

The cash flow statement records the inflows and outflows of the business, since the business is paying another it should be under outflows.
So in the Operating Activities under outflows, we should have it as 'Prepaid Cleaning Expense' with the value 1,200.
Would that be right?

Somye

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Re: Prepaids in a Cash Flow Statement
« Reply #1 on: September 21, 2012, 10:17:50 pm »
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Seeing as 5 months was used, you'd have
cash outflows:
Prepaid cleaning:90
Cleaning expense:450 (90*5)

Remember that all the statements are prepared onbalance day, after all adjustments have been made!
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