3.10 Statement of cash flows

Question 1

What information does the cash flow statement provide?

Answer 1

Changes in cash and cash equivalents over the accounting period.

Question 2

What items constitute cash and cash equivalents?

Answer 2

• cash in hand
• cash at bank
• short term investment
• bank overdrafts

Question 3

What is the structure of the statement of cash flows:

Answer 3

• cash receipts from customers
• cash paid to suppliers
• cash paid to employees
• interest paid
• taxes paid
• cash generated from operations

Question 4

What is a debenture?

Answer 4

A written acknowledgement of debts used by large companies to borrow money at a fixed rate of interest.

Question 5

What is a bond?

Answer 5

A fixed income investment where an investor loans money to an entity for a defined period at a fixed interest rate.

Question 6

What is the role of IAS 7?

Answer 6

Governs the preparation and presentation of cash flow statements.

Question 7

How is the indirect method of cash flow calculation carried out?

Answer 7

1 Start with net income
2 Add back depreciation
3 Calculate changes in balance sheet items.