Chapter 13

Question 1

Which activities are reported on the Statement of Cash Flows?

Answer 1

• Operating activities: Principal income-producing activities. Arise from cash effects of transactions that create revenues and expenses.
• Investing activities: Acquisition and disposition of non-current assets (investments & loans).
• Financing activities: Result in changes in the size and composition of equity (shares and debt).

Question 2

Which activities are not reported on the Statement of Cash Flows?

Answer 2

Significant investing and financing activities that do not affect cash, such as:

• Issue of shares, to purchase assets and/or reduce liabilities;
• Conversion of debt into equity;
• Exchanges of property, plant, and equipment.

Question 3

Indirect method

Answer 3

A method of determining net cash provided (used) by operating activities on the statement of cash flows, by adjusting each item on the income statement from the accrual basis to the cash basis.

Question 4

Direct method

Answer 4

A method of determining net cash provided (used) by operating activities on the statement of cash flows, in which the cash receipts and payments are listed.