Module 17: Statement of Cash Flows

Question 1

Direct or Indirect Presentation in Reporting Operating Activities

Answer 1

The FASB decided that preferable method of presenting net cash flows from operating activities is by directly showing major classes of operating cash receipts and payments. However, the indirect (reconciliation) method is also permitted. When the direct method is used, it is also necessary to present a separate accompanying schedule showing the indirect method. The direct method is discussed first, followed by a discussion of the indirect method.

Question 2

Investing Activities

Answer 2

Per ASC Topic 320, investing activities include making and collecting loans and acquiring and disposing of debt or equity instruments and property, plant, and equipment.

Question 3

Cash Collected From Customers

Answer 3

Sales – [End AR – (Beg. AR – Write-offs)] = Collections

Question 4

Operating Activities

Answer 4

Operating Activities includes delivering or producing goods for sale and providing services. Operating activities include all transactions that are not investing and financing activities.

Question 5

Financing Activities

Answer 5

include obtaining resources from owners and returning the investment. Also included is obtaining resources from creditors and repaying the amount borrowed