Cash Flow Statememts Flashcards
Which IAS covers the layout of the CFS?
IAS 7
Why is a cash flow statement useful?
Shows inflows and outflows
Measure of liquidity
Cash is vital
Shows links between sources and uses
Why is cash so important?
Liquidity
used to pay day to day expenses and pay off debts
True or false? Cash is more important than profit
It depends
Cash more important in ST profit more important in LT
Cash is more objective what does this mean?
It is based on factual/verifiable figures
Why do businesses prepare CFS?
Statutory requirement
Used to give fuller picture
Bridges SoFP dates
Objective
What are the 3 sections of the CFS?
Operating activities
Investing activities
Financing activities
What does operating activities section always begin with?
Profit from operations
Why is depreciation always added?
It is subtracted as an expense but it is not cash so add back in
How to calculate profit/loss on disposal?
Selling price - NBV
True or false profit on disposal is subtracted in the CFS
True it is added in the income statement but it isn’t cash
What goes into the investing section of the CFS?
Additions of NCA
disposals of NCA
Dividends received
Investment revenue
What goes into financing section?
Share issues
Loans
Dividends paid
When calculating cash from share issue where do you look for information?
Share capital AND share premium
What options do businesses have for borrowing money long term?
Debentures
Mortgage
Long term bank loan
What are the last 3 labels in a CFS?
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
How do you know if your answer to the CFS is correct?
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
What is the title of the CFS?
Cash Flow Statement for xxx for the year ended xxx
How to calculate profit from operations from 2 statements of financial positions?
Difference between retained earnings and then adjust for dividends to get profit for the year. Then add interest and tax.
How to calculate depreciation for the year from 2 statements of financial positions?
Difference between the NBV of the asset and adjust for additions, disposals, revaluation and impairment.
