Chapter 16 - Statement of cash flows Flashcards
What are cash and cash equivalents?
cash in hand and/or cash in the bank and current asset investments less overdrafts repayable on demand
What are cash flows from operating activities?
The main revenue - generating activities of the entity
What are cash flows from investing activities?
the acquisitions and disposals og long-term assets and other investments
What are cash flows from financing activities?
The activities that alter the equity and long-term borrowing of the entity
IAS 7 requires the statement of cash flows to be split into 3 sections, showing cash from what?
- operating activities
- investing activities
- financing activities
What are the two methods of preparing the figure for cash generated from operations?
- direct method
- indirect method
What is the direct method?
looks at actual cash flows from operations from the underlying records.
How do we calculate the direct method?
calculated by deducting the amount of cash paid to suppliers, employees and spent on other expenses, from those amounts received from customers
What is the indirect method?
Starts with the profit before tax, and then adjusts this figure for any non-cash (e.g. depn) or non-opertaing (e.g., investment income) items included, to arrive at the cash generated from operations
What is cash?
cash on hand (including overdrafts) and on-demand deposits
what are cash equivalents?
short-term highly liquid investments, subject to insignificant risk of changes in value
What are some examples of operating activities?
cash generated from operations, interest paid, tax paid
What are some examples of investing activities?
purchase of assets, sale proceeds, investment income
What are some examples of Financing activities?
Share issue, Loan repaid or received, lease repaid, dividends paid
What are cash flows from investing activities?
cash flows relating to non-current assets
