When preparing the statement of cash flows, Jaida calculated the following amounts: Net cash provided by operating activities: $14.8 million Net cash used by investing activities: $3.2 million Net cash provided by financing activities: $5.7 million Net increase in cash: $23.7 million. However, when comparing the net increase in cash she calculated to the actual difference in the beginning and ending balance of the Cash account, they did not agree. Why?

The actual net increase in cash is $17.3 million and not $23.7 million as computed by her. Hence the difference in the beginning and ending balance of the Cash account will not agree to her computation.

Explanation:

The statement of cash flow by indirect method shows the business activities in 3 groups. These are operating activities, investing activities and financing activities. The cash flows from these activities added to the beginning cash balance gives the ending cash balance.

Given;

Net cash provided by operating activities: $14.8 million

Net cash used by investing activities: $3.2 million

Net cash provided by financing activities: $5.7 million

Net increase in cash: $23.7 million

Net increase in cash flow = Ending cash balance - Opening cash balance

Net increase in cash flow = $14.8 million - $3.2 million + $5.7 million

= $17.3 million

The actual net increase in cash is $17.3 million and not $23.7 million as computed by her.

answer; normative economics;