Chapter 14

Question 1

statement of cash flows

Answer 1

reports on a business’ cash receipts and cash payments for a specific period.

• reports on the cash flows of a business
• reports why cash or decreased during the period
• covers a span of time and is dated the same as the income statement

Question 2

3 types of cash flows

Answer 2

• operating activities
• investing activities
• financing activities

Question 3

operating activities

Answer 3

• is the first section on the statement of cash flows

- the section reports on activities that create revenue or expense in the entity’s business

Question 4

investing activities

Answer 4

2nd category

-this section reports cash receipts and cash payments that increase or decrease long-term assets.

Question 5

financing activities

Answer 5

include cash inflows and outflows involved in long-term liabilities and equity.

Question 6

Two Formats for Operating Activities

Answer 6

Indirect Method
-starts with accrual income and adjusts to net cash
-uses account relationships to determine changes in cash
Direct Method
-restates the income in terms of cash
-shows actual cash receipts and cash payments