14. Statement of Cash Flows

Question 1

According to IAS 7, what are companies required to do?

Answer 1

Include a Statement of Cash Flows in their financial statements.

Question 2

What is a Statement of Cash Flows?

Answer 2

A summary of cash receipts and payments.

Question 3

What are the two methods of preparing a Statement of Cash Flows?

Answer 3

The direct and indirect methods.

Question 4

What is cash flows from operating activities?

Answer 4

Cash from profit.

Question 5

What is cash flows from investing activities?

Answer 5

• Cash from buying/selling non-current assets.
• Interest received
• Dividends received

Question 6

What is cash flows from financing activities?

Answer 6

• Proceeds from the issue of shares
• Raising cash from long term borrowing
• Repaying long term borrowing

Question 7

What is the indirect method of preparing the Statement of Cash Flows.

Answer 7

To take the profit before tax and adjust it.
- Adjust for non-cash items
- Adjust for changes in working capital

Question 8

What is the direct method of preparing the Statement of Cash Flows.

Answer 8

Shows the actual cash paid and received in respect to cash generated from operations.