Income Statement Accounts cash Flows from Operating Activities Adjustments { + Decrease_in accounts receivable or Sales revenue - ·Increase m accounts receivable + Increase in deferred revenue or - Decrease in deferred revenue = } { + Increase in unearned revenues or - Decrease in unearned revenues - Gains on disposals of assets and liabilities - Investment income (equity method) Other revenues Collections from customers }= + Decrease in interest receivable or - Increase in interest receivable + Amortization of premium on investment in bonds or - Amortization of discount on investment in bonds Interest revenue and dividend revenue = { + Increase in inventmy or Cost of goods sold - Decrease in inventory + Decrease in accounts payable or · - Increase in accounts payable Selling and administrativ e expenses }= - Depreciation, depletion and amortization expense + Decrease in accrued expenses or - Increase in accrued expenses + Increase in prepaid expenses or - Decrease in prepaid expenses + Decrease in interest payable or - Increase in interest payable + Amortization of premium on bonds payable or - . Amortization of discount on bonds payable Interest expense Other expenses Income tax expense Net Operating Cash Flows = = Interest and dividends collected Other operating receipts Payments to suppliers Payments of operating expenses Payments of interest { - Losses on disposals of assets and liabilities } _ - Investment loss ( equity method) Other operating payments + Decrease in income taxes payable or - Increase in Income taxes payable + Decrease in deferred income taxes payable or - Increase in deferred income taxes payable Payments of income taxes = cash Inflows From Operating Activities Cash Outflows For Operating Activities Figure 13-3. Adjustment~ to Convert Income Statement Amounts to Operating Cash Flows (DiRECT METHOD) [ Net Income after Taxes ] Plus Decreases in current assets (except cash, marketable securities and nontrade accounts) Increases in current liabilities (except financing or non-operating accounts, e.g., bank loan, current maturities of long-term debt) · Depreciation, depletion, and amortization expense Amortization of discount on bonds payable Amortization of premium on investment in bonds Increase in deferred income taxes loss (net) on disposal of assets or liabilities Subsidiary loss under the equity method Interest expense * Income taxes* Minus Increases in current assets ( except cash, marketable securitiesr and nontrade accounts) Decreases in current liabilities (except financing or non-operating accounts, e.g., bank loan, current maturities of long-term debt) Amortization of premium on bonds payable Amortization of discount on investment in bonds Decrease in deferred income taxes Gain (net) on disposal of assets or liabilities Subsidiary gain under the equity method Equals [ Net cash Flow From Operations ] Interest paid Income taxes paid ( Net cash from Operating Activities ) * Shown separately Figure 13-4. ~djustments to Convert Net Income to Net Cash Flow from Operating Activities (INDIRECT METHOD)