CH 11 Accounting Cash Flow Flashcards
do inventories belong to the statement of operating activities
Yes
How are inventories recorded?
(inc.) Dec. In inventory
Examples of inventory
Examples of inventory that a manufacturing business may have include: raw materials, such as wood, to make a shelf. work-in-process inventory, such as an unfinished cake in a food manufacturing business. finished goods inventory, such as a bed you’ve finished making.
Examples of office supplies
Office supplies include copy paper, toner cartridges, business forms, pens, pencils, stamp pads, letter envelopes and other desk supplies.
Where is equipment, in which cash flow?
In investing activities.
The cash flow from investing shows the cash used to purchase fixed and long-term assets, such as plant, property, and equipment (PPE), and also any proceeds from the sale of these assets.
Treasury Stock, in which cash flow?
The purchase of Treasury Stock will cause a decrease in cash from financing activities. The purchase of treasury stock results in a decrease in stockholders’ equity. Changes in stockholders’ equity and long-term liabilities are shown in the financing activities section of the statement of cash flows.
Are taxes calculated in operating cash flow?
Yes, taxes are included in the calculations for the operating cash flow
Is there a direct and indirect method for financing and investing activities?
There is only a direct method for financing and investing activities.
The indirect method and direct method can both be used for operating cash flow.
What has to be listed for the direct method in operating activities?
Major categories of operating cash receipts: - Cash receipts (collections) from customers - Interest and dividends received Major categories of cash disbursements: - Payment to suppliers - Payment to employees - Payment of Interest - Payment of income tax - Payment of operating expenses
cash equivalents
Highly liquid short-term investments that can be converted into cash immediately
cash flows
cash receipts and cash payments (disbursements)
cash realization ratio
an entity’s ability to generate cash from net or operating profit. Calculated as cash flows from operations divided by net profit.
free cash flow
The amount of cash available from operations after paying for capital expenditures such as investments in PPE.
indirect method
Format of the operating activities section of the statement of cash flows.
Starts with net income and reconciles to cash flows from operating activities.
investing activities
Activities that increase or decrease the long-term assets available to the business
Put on Paper flash card
Cash Flows from Operating Activities:
Net Income
1. + Non-Cash Expenses:
(Depreciation, Depletion & Amortization Expense)
- Non-Operating Losses:
(Loss on Sale of Non-Current Assets)
− Non-Operating Gains:
(Gain on Sale of Non-Current Assets)
- Non-Operating Losses:
- The decrease in Current Assets other than cash or cash equivalents:
(Accounts Receivable, Prepaid Expenses, Inventory, etc.)
− Increase in Current Assets other than cash or cash equivalents
- The decrease in Current Assets other than cash or cash equivalents:
- The increase in Current Liabilities:
(Accounts Payable, Accrued Liabilities, Income Tax Payable etc.)
− Decrease in Current Liabilities
- The increase in Current Liabilities:
= Net Cash Flow from Operating Activities
What are non-operating losses or gains?
Losses or gains on sale of non-current assets
What are current assets?
Accounts Receivables, Prepaid Expenses, Inventory, etc.
What are current liabilities?
Accounts Payable, Accrued Liabilities, Income Tax Payable
What are current liabilities?
Accounts Payable, Accrued Liabilities, Income Tax Payable
What is equipment?
Equipment is a non-current or long-term asset account which reports the cost of the equipment.
It is listed in the investing activities.
