F5 - M5 - Statement of Cash Flows Flashcards
Under the statement of cash flows, what are the two methods to present operating cash flows?
Direct and Indirect, per the lectures, you only need to know how to do the indirect method, but it is important to know there are two methods.
What does the operating section of the statement of cash flows look at? What are those?
It looks at the change in operating assets and operating liabilities. See below for what those are:
Operating assets: All current assets except cash and cash equivalents.
Operating liabilities: All non-interest bearing obligations
Look at income statement accounts, and related current asset and current liability accounts.
What does the investing section of the statement of cash flows look at?
Cash receipts and disbursements from non-current assets.
Cash effects of long term assets.
What does the financing section of the statement of cash flows look at?
Cash receipts, interest bearing debt, and equity.
Cash effects of long term liability and equity accounts.
What is the point of the statement of cash flows?
The statement of cash flows shows you the change in cash from your operating, investing, and financing activities. Once you have that, you add that to your beginning balance and that gives you your ending balance, and will reconcile to the cash account on the balance sheet.
What is the formula for the indirect method for operating cash flows?
Net income + Noncash expenses/losses - Noncash income/gains + Increases (decreases) in operating liabilities/ (assets) - Increases (decreases) in operating assets/(liabilities).
For financing and investing, what are the methods that those can be presented in?
Just direct method and that is it.
When the indirect method is used, what is the supplemental requirement that is required to be disclosed?
Cash paid for interest and income taxes are required to be disclosed.
For operating, investing, and financing, what are normally subtracted and added to beginning cash?
Operating is added
Investing is subtracted
Financing is added
Is the bond discount amortization what type of cash flow?
Operating cash flow. You would add this to net income to increase your income.
Money received as a dividend should be reported where on the statement of cash flows?
Dividend received on stock should be reported as a operating cash inflow.
When you pay off a loan balance, what kind of cash flow activity would this be considered?
When paying a debt obligation, this would be a financing activity.
