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Flashcards in Statement of Cash Flows Deck (27):
1

Name the four major sections in the direct method cash flow statement.

Operating, investing, financing, and reconciliation of net income and net operating cash flows.

2

Name two formats permitted for the statement of cash flows.

direct and indirect

3

When is a Statement of Cash Flows required?

For all business enterprises that report both financial position (Balance Sheet) and results of operations (Income Statement) for a period.

4

What is reported on the Statement of Cash Flows?

-Information about the cash receipts and cash payments for an entity
-the difference between net income and net operating cash flows
-information about investing and financing activities which do not involve cash inflows or outflows.

5

What is the direct method on the statement of cash flows?

This method presents actual inflows and outflows from cash operations. Must also diclose the indirect method (reconciliation of net income to cash flows from operations) as a supporting schedule.

6

What is the cash flow category for interest paid and received?

Operating activities

7

What is the reporting basis of the statement of cash flows?

The reporting basis is cash and cash equivalents.

8

What is the cash flow category for collections of principal amounts on loans made to other entities?

Investing

9

What is the indirect method on the statement of cash flows?

Reconciles net income to cash flows from operating activities.

10

What is the basic purpose of the statement of cash flows?

The basis purpose is to provide information about the cash receipts and cash payments for an entity to help investors, creditors, and others.

11

List the required categories for the Statement of Cash Flows.

-Operating Activities
-Investing Activities
-Financing Activities
-Effects of Foreign Currency Translation
-Reconciliation of net cash inflows/outflows with the reported change in cash and cash equivalents on the Balance Sheet
-Non-Cash Investing and Financing Activities

12

What is the cash flow category for dividends paid?

Financing

13

What are some examples of cash outflows classified as Investing Activities?

-Purchase of long-term assets
-Lending to others
-Investment in debt and equity securities held to maturity and available for sale
-Purchase of productive assets (not inventory)

14

What is the cash flow category for purchases of trading securities?

Operating

15

What is the cash flow category for loans made to other entities?

Investing

16

What are some examples of cash outflows classified as Financing Activities?

-repurchase of own stock
-paying back lenders (principal only)
-payment of dividends

17

What is the cash flow category for purchases of securities available for sale?

Investing

18

What is the cash flow category for principal payments on short term and long term loans from financial institutions made to acquire inventory for resale?

Financing

19

Where are non-cash investing and financing activities reported?

They are reported on the face of the Statement of Cash flows or as a separate disclosure.

20

What is the cash flow category for principal payments on short term and long term loans from suppliers made to acquire inventory for resale?

Operating

21

What are some examples of cash inflows classified as Investing Activities?

-Sale of long term assets
-Collection of loan principal
-Disposal of held to maturity and available for sale debt and equity securities
-Sale of productivity assets (not inventory)

22

What are some examples of cash inflows classified as Financing Activities?

-Sale of own stock
-Proceeds from borrowing

23

Where is the cash effect of foreign currency translation reported?

It is reported as a separate part of the reconciliation of the change in cash and cash equivalents during the period.

24

What is the cash flow category for principal payments on short term and long term loans (from financial institutions or dealers) made to acquire plant assets?

Financing

25

amount paid to suppliers

amount paid to suppliers = COGS - Inventory decrease - AP increase

26

indirect method

Company starts with net income and "backs out" all of the accruals made by accrual accounting

27

Non Cash expenses

Any non cash expenses on the income statement needs to be ADDED back to net income to derive cash flows from operations. Any non cash gains on the income statement need to be subtracted from net income to derive cash flows fro operation.