Cash sales information can be found in the “accounts receivable” column of some financial statements. However, some accounts receivable don’t represent cash sales, but rather cash owed by customers. Most American financial statements track receivables on an accrual basis, meaning that transactions are recorded when the sale is made, not when cash is received. The accrual basis of the statements means credit and not-yet-received accounts receivable must be removed from the accounts receivable column to extract cash sales from the statement. Cash sales may be calculated from balance sheets, income statements and retained earnings statements. For statements of cash flows, cash sales must be figured out to create the statement.
Figuring Out Cash Sales from Balance Sheets, Income Statements or Retained Earnings Statements
Recognize and list payments. The payments may be listed as cash, with the amount received credited on the right side of the appropriate column. Be sure to note any deductions in the payments from coupons or other discounts.
Estimate uncollected accounts by comparing payments received to total revenue for the accounting period. Subtracting payments received from total revenue should give you uncollected payments.
Subtract uncollected payments from your earlier list of payments. The resulting number is an estimate of your cash sales.
Figuring Out Cash Sales for Statements of Cash Flows
List cash inflows from operating activities listed on an income statement. These items include the sales of goods and services, interest received and dividends received.
List cash inflows from investments and long-term assets listed on the balance sheet. These items include sales of equipment or property, sale of investments, sale of debts, sale of equity and collection on loans or other long-term debt.
List cash inflows from changes in long-term liabilities and stockholder equity listed on stockholder equity and other statements. These items include sale of common stock and the issuance of long-term debt such as notes or bonds.
Double check your list, and remove non-cash sale activities, such as directly issued common stock, bonds converted to common stock, debt from purchasing assets and non-cash exchange of assets.
Total the contents of your list, and subtract non-cash sale activities. The result is your total cash sales.
Because of the accrual nature of accounting, it may be impossible to determine exact amounts of cash received, especially for large and complex accounts.
- U.S. Securities and Exchange Commission: Beginners' Guide to Financial Statements
- “Financial Accounting, Sixth Edition”; Jerry J. Weygandt, et al.; 2008
- Accounting for Management: Cash Flow Statement Example-Direct and Indirect Method
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