FAR - Cash Flow Statement Flashcards Preview

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Flashcards in FAR - Cash Flow Statement Deck (33):
1

Indirect method:

Converting Net income to cash basis >> Operating cash flow.

What do you deal with Gains and losses reported in Net Income?

Operating cash flow on gains:

Subtract gains to Net Income (Net income - gains)

Operating cash flow on losses:

Add losses back to Net income (Net income + losses)

FYI - why subtract gains? Getting a gain is not same as getting cash for a gain.

FYI - why add back lossess? Losses do not leave the businesses as cash.

2

Investing cash flow on gains and losses.

How gains and losses are treated/handled for investment cash flow?

Investing cash flows on gains:

Add the gains ( + gains)

Minus the losses ( - losses)

3

Operating cash flow on Depreciation expense.

How is depreciation expense handled in operating cashflow?

Operating cash flow on depreciation expense.

Add the depreciation expense to Net Income

NOTE: Do not + or - accumulated depreciation to operating cash flow.

Operating cash flow only deals with income statement (net income) items that is converted from accrual basis to cash basis.

Accumulated depreciation is on the balance sheet where the accumulated depreciation has nothing to deal with operating cash flow.

4

CPA exam tip:

What does net cash provided mean?

What does net cash used mean?

Net cash provided = + cash flow

Net cash used = - cash flow

5

Indirect method on cash flow reporting:

Supplemental disclosure reports what items?

Supplemental disclosure reports:

1) Interest paid out to others
2) Income tax paid to government

6

What is the indirect method formula to come up with the operating cash flow

Net income
+ noncash expense
+ noncash loss
- noncash income
- noncash gain
+ increase operating liabilities (increase accounts payable)
+ decrease in assets (sold assets for cash)
- increase in operating assets (buy assets)
- decrease liabilities (pay down liabilities)
________________________________
= Operating cash flow

7

Direct method:

What's the formula to arrive at "cash received from customers"?

Revenues
- increase in receivables
+ Decrease in receivables (actually received cash)
+ Increase in unearned revenue (get cash early)
- Decrease in unearned revenue
____________________________________
= Cash received from customers

8

Direct method:

When received interest, does this increase cash-flow or decrease cash-flow?

Receiving interest = increase cash flow

9

Direct method:

When received dividends, does this increase cash-flow or decrease cash-flow?

Receiving dividends = increase cash flow

10

Direct method:

When received receipt of insurance proceeds and lawsuit settlements, does these increase cash-flow or decrease cash-flow?

Received receipt of insurance proceeds and lawsuit settlements = increase cash flow

11

Direct method:

When receive cash from "current assets" trading securities, does this increase cash flow or decrease cash flow?

Receive cash from "current assets" trading securities = increase cashflow

12

Direct method:

What's the formula to cash paid out to suppliers?

Cost of goods sold
+ increase in inventory (buy more inventory)
- Decrease in inventory (sell inventory)
- increase in accounts payable
+ decrease in accounts payable
___________________________
= Cash paid out to suppliers

Note: remember do not confused with this on formula to calculate from net income to cash flow basis.

This to calculate like it's an expense when cash is paid out. Therefore, increase cash paid when spent to cash on inventory or pay down accounts payable.

13

Direct method:

What's the formula to cash paid out to employees?

Salaries and wages expense
- increase in wage payable (liability)
+ decrease in wage payable (add increase in cash pay out)
_______________________
= Cash aid to employees

14

Direct method:

When interest is paid, does this increase cash flow or decrease cash flow?

Interest paid = decrease cash flow.

15

Direct method:

When income tax is paid out, does this increase cash flow or decrease cash flow?

Income tax paid = decrease cash flow

16

Direct method:

When cash paid to acquire "current assets" based trading securities, does this increase or decrease cash flow?

Cash paid to acquire current-assets-based trading securities:

= decrease cash flow

17

Direct method:

What's the other operating cash payments formula?

Other operating expenses
- Decrease in prepaid expenses
+ increase in prepaid expenses (add cash paid out)
+ decrease in accrued liabilities (add cash paid out
- Increase in accrued liabilities
_________________________
= cash paid to other expenses

18

Selling products / collecting receivables

goes to which cash-flow type:

a) Operating cash flow
b) Investing cash flow
c) financing cash flow

Selling products / collecting receivables

to

Operating cash flow (CFO = cash-flow operating)

19

Purchasing inventory /paying vendors

goes to which cash flow type:

a) operating cash flow
b) investing cash flow
c) financing cash flow

Purchasing inventory /paying vendors

to

Operating cash flow (CFO = cash-flow operating)

20

Purchasing supplies & services / paying vendors

goes to which cash flow type:

a) operating cash flow
b) investing cash flow
c) financing cash flow

Purchasing supplies & services / paying vendores

to

Operating cash flow (CFO = cash-flow operating)

21

Paying taxes

goes to which cash flow type:

a) operating cash flow
b) investing cash flow
c) financing cash flow

Paying taxes

to

Operating cash flow (CFO = cash-flow operating)

22

Purchasing / selling trading securities (general rule)

goes to which cash flow type:

a) operating cash flow
b) investing cash flow
c) financing cash flow

Purchasing / selling trading securities (general rule)

to

Investing cash flow (CFI = cash flow investing)

23

Recording depreciation, amortization, depletion

goes to which cash flow type:

a) operating cash flow
b) investing cash flow
c) financing cash flow

Recording depreciation, amortization, depletion

to

no net cash flow

24

Collecting interest on an investment

goes to which cash flow type:

a) operating cash flow
b) investing cash flow
c) financing cash flow

Collecting interest on an investment

to

operating cash flow

25

Collecting dividends on an investment

goes to which cash flow type:

a) operating cash flow
b) investing cash flow
c) financing cash flow

Collecting dividends on an investment

to

operating cash flow

26

Recording income of equity method affiliates

goes to which cash flow type:

a) operating cash flow
b) investing cash flow
c) financing cash flow

Recording income of equity method affiliates

to

no net csh flow

27

Selling long-term assets or investments (noncash equivalents and non-trading securities) - cash proceeds

goes to which cash flow type:

a) operating cash flow
b) investing cash flow
c) financing cash flow

Selling long-term assets or investments (non-cash equivalents and non-trading securities) - cash proceeds

to

Investing cash flow (CFI = cash flow investing)

28

Borrowing funds (i.e. bank loans, issuing debt)

to which cash flow type

a) operating cash flow
b) investing cash flow
c) financing cash flow

Borrowing funds (i.e. bank loans, issuing debt)

to

Financing cash flow (CFF = cash flow financing)



29

Paying interest on debt

to which cash flow type:

a) operating cash flow
b) investing cash flow
c) financing cash flow

Paying interest on debt

to

Operating cash flow (CFO = cash flow operating)

Note: why operating cash flow.

Operating cash flow is from converting Income statement (accrual basis) to cash basis - operating cash flow.

So interest income/dividend income, interest expense/dividend expense goes to Operating cash flow.

30

Issuing common or preferred stock

to which cash flow type:

a) operating cash flow
b) investing cash flow
c) financing cash flow

Issuing common or preferred stock

to

Financing cash flow (CFF = cash flow financing)

31

Paying dividends on common stock or preferred stock

to which cash flow type

a) operating cash flow
b) investing cash flow
c) financing cash flow

Paying dividends on common stock or preferred stock

to

Financing cash flow (CFF = cash flow financing)

32

Repurchase stock (i.e. treasury stock)

to which cash flow type

a) operating cash flow
b) investing cash flow
c) financing cash flow

Repurchase stock (i.e. treasury stock)

to

financing cash flow (CFF = cash flow financing)

33

What are the various words in the CPA exam questions that means


Cash - in (cash flow in, cash inflows)

and


Cash-out (cash flow out, cash outflows)

Cash-in: sell, proceeds, collect, borrow loan, issue stocks


Cash out: purchase, pay, repurchase, buy, acquire, reacquire

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