Chapter 5 - Statement Of Cash Flows

Question 1

IAS 7

Answer 1

Provides guidelines for the presentation of the statement of cash flows, which is split into 3 sections

Question 2

What are the 3 sections of the cash flow?

Answer 2

Operating - normal revenue activities of the business

Investing - acquisitions and disposal non-current assets and investments (dividends and interest)

Financing - affects the contributed equity (share capital) and borrowings

Question 3

What is the indirect method?

Answer 3

Net profit or loss is adjusted for non cash items and working capital adjustments

Commonly used

Question 4

What is the direct method?

Answer 4

Shows actual cash receipts and payments

More difficult to prepare as information is not easily available

Question 5

Operating activities proforma

Answer 5

Profit before tax
Depreciation
Loss on disposal 
Finance costs
Receivables 
Payables
Inventory
Dividends received 

Cash generated from operations
Interest paid
Tax paid

Net cash from operating activities