Cash Flow Statememts

Question 1

Which IAS covers the layout of the CFS?

Answer 1

IAS 7

Question 2

Why is a cash flow statement useful?

Answer 2

Shows inflows and outflows
Measure of liquidity
Cash is vital
Shows links between sources and uses

Question 3

Why is cash so important?

Answer 3

Liquidity
used to pay day to day expenses and pay off debts

Question 4

True or false? Cash is more important than profit

Answer 4

It depends
Cash more important in ST profit more important in LT

Question 5

Cash is more objective what does this mean?

Answer 5

It is based on factual/verifiable figures

Question 6

Why do businesses prepare CFS?

Answer 6

Statutory requirement
Used to give fuller picture
Bridges SoFP dates
Objective

Question 7

What are the 3 sections of the CFS?

Answer 7

Operating activities
Investing activities
Financing activities

Question 8

What does operating activities section always begin with?

Answer 8

Profit from operations

Question 9

Why is depreciation always added?

Answer 9

It is subtracted as an expense but it is not cash so add back in

Question 10

How to calculate profit/loss on disposal?

Answer 10

Selling price - NBV

Question 11

True or false profit on disposal is subtracted in the CFS

Answer 11

True it is added in the income statement but it isn’t cash

Question 12

What goes into the investing section of the CFS?

Answer 12

Additions of NCA
disposals of NCA
Dividends received
Investment revenue

Question 13

What goes into financing section?

Answer 13

Share issues
Loans
Dividends paid

Question 14

When calculating cash from share issue where do you look for information?

Answer 14

Share capital AND share premium

Question 15

What options do businesses have for borrowing money long term?

Answer 15

Debentures
Mortgage
Long term bank loan

Question 16

What are the last 3 labels in a CFS?

Answer 16

Net increase/decrease in cash and cash equivalents
Cash and cash equivalents at the start of year
Cash and cash equivalents at the end of year

Question 17

How do you know if your answer to the CFS is correct?

Answer 17

Add the Net increase/decrease in cash and cash equivalents to the Cash and cash equivalents at the start of year
This should give the Cash and cash equivalents at the end of year

Question 18

What is the title of the CFS?

Answer 18

Cash Flow Statement for xxx for the year ended xxx

Question 19

How to calculate profit from operations from 2 statements of financial positions?

Answer 19

Difference between retained earnings and then adjust for dividends to get profit for the year. Then add interest and tax.

Question 20

How to calculate depreciation for the year from 2 statements of financial positions?

Answer 20

Difference between the NBV of the asset and adjust for additions, disposals, revaluation and impairment.