How to Show Gains on the Sale of Equipment on a Cash Flow Statement

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The cash flow statement --- or statement of cash flows, in proper accounting terminology --- identifies all sources and uses of cash. The sale of equipment falls under the investing section on the direct method preparation style for this statement. The investing section contains information on the purchase and sale of all investments or fixed assets a company owns. Along with the operating and financing section, these sections together report the total net cash gained or lost during an accounting period.

  • Review the company's general ledger. Identify all long-term assets --- specifically equipment --- sold during the current period.

  • List each equipment item sold under the investing section. Include a brief description of the item sold and the net gain for the item.

  • Subtotal the equipment gains against any other items sold that meet the guidelines for the investing section.

  • Include the total net gain or net loss from the investing section with the totals from the operating and financing sections. Report the final total at the bottom of the cash flow statement.

Tips & Warnings

  • The direct cash flow statement is the only report that includes the sale of equipment. The indirect cash flow method adjusts net income for non-cash expenses.

References

  • "Fundamental Financial Accounting Concepts"; Thomas P. Edmonds et al.; 2011
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