F2C - Chapter 15: Consolidated statement of cash flows

Question 1

What does cash consist of?

Answer 1

Cash in hand and deposits repayable upon demand, less overdrafts. This includes cash held in a foreign currency.

Question 2

What are cash equivalents?

Answer 2

Short-term, highly liquid investments that are readily convertible into known amounts of cash and are subject to an insignificant risk of changes in value

Question 3

What is a cash flow?

Answer 3

Inflow and outflows of cash and cash equivalents

Question 4

What is a cash flow from operating activities?

Answer 4

Entity’s principal revenue earning activities and other activities that do not fall under the investing activities and financing activities

Question 5

What is cash flows from investing activities?

Answer 5

Acquisition and disposal of long-term assets and other investements

Question 6

What is cash flows from financing activities?

Answer 6

Activities that change the size and composition of the entity’s equity and borrowings

Question 7

What is the direct method when calculating the cash from operations?

Answer 7

Shows operating cash receipts and payments. This approach includes cash receipts from customers, cash payments to suppliers and cash payments to and on behalf of employees

Question 8

What is the indirect method when calculating the cash from operations?

Answer 8

Uses a working that reconciles profits to cash flows from operating activities. The working starts with profit before tax and adjusts it for non-cash charges and credits, to reconcile it to the net cash flow from operating activities

Question 9

What items is the indirect method needed for?

Answer 9

Depreciation, amortisation and impairment
Profit or loss on disposal of non-current assets
Movements in inventory
Movements in receivables
Movements in payables

Question 10

What cash flows fall under the heading cash flows from investing activities?

Answer 10

Cash paid for PPE and other NC assets
Cash received on the sale of PPE and other NC assets
Cash paid for investments in or loans to other entities
Cash received from the sale of investments or the repayment of loans to other entities

Question 11

What is included under the heading cash flows from financing activities?

Answer 11

Receipts or repayments of principal from or to external providers of finance.

Question 12

In a consolidated statement of cash flows what issues would arise that would not have been considered within single entity cash flows?

Answer 12

Dividends paid to NC assets
Dividends received from the association
Cash flows related to the acquisition of a subsidiary during the year