Last Unit 3 Sac Cash Flow Flashcards
NCA H.C
This figure refers to the purchase price of the asset , verified by a source document to ensure reliable reports as the figure is verified.
Accumulated depreciation
Refers to the total amount that has been consumed/incurred by the entity at this point of it’s life.
Carrying value
Refers to the value of the nca which is still yet to be consumed/ allocated as an expense by the entity plus any residual value.
Prepaid expense
Is an asset as it’s a resource controlled by the entity from a past events (purchase of expense in advance) from which a future economic benefit is expected to flow into the entity.
Accrued expense
Is a liability as it’s a present obligation of the entity (unpaid expense) from which the settlement is expected to result in an outflow of economic embodying resources ( cash paid to cover the excess expense ).
Cash flow parts
Operating refers to the day to day trading activity of the firm
Investing refers to all purchases and sales of non current assets
Financing refers to the change in the firms financial structure.
Cash surplus and deficit
Surplus refers to where cash receipts outweighs the cash payments therefore more cash in then out
Deficit refers to where cash payments outweighs the cash receipts therefore more cash out then in
Benefits of cash flow statement
The cash flow statement is a deeper analysis of the bank account, it breaks down all outflows(uses) and inflows(sources) of cash into 3 parts operating, investing and financing. The cash flow statement allows firm owners to make better decisions, as it shows then were problem areas are and what needs corrective actions, it can also be used to be compared against a budgeted cash flow statement to further identity problematic areas,
Cash vs profit STANDARD 1
Cash is different to profit, as cash is determined via the cash flow statement which looks at inflows minus outflows to determine a cash surplus or a cash deficit. In contrast, profit is determined via the income statement which looks at revenues earned minus expenses consumed and incurred to determine a profit or loss value.
Cash vs profit options 2A
Cash > profit
Receipts from debtors > credit sales
Accrued - incurred > paid
The figure for (receipts from debtors/ incurred expenses) of $… is going to increase our cash by a larger value then what our net profit is going to increase by from (credit sales/paid expense ) of $…
Therefore being a reason as to why there is a discrepancy in cash and profit figures.
Cash vs profits option 2B
Profit > cash
Credit sales > receipts from debtors
Paid > incurred
The figure for credit sales of $… is going to increase net profit figures by a larger value then what our receipts from debtors will increase our cash figure of $….
Therefore being a reason as to why there is a discrepancy to the cash and profit values.
Costs of an nca
Refers to all costs incurred to getting the asset into location and condition ready for use which will provide benefits to the life of the non current asset. Costs included are the Initial cost, modifications, installation and delivery.
Standard cash flow statement line entries
Operating activities
Inflows & Outflows
Net cash flows from operating activities
Investing activities
Inflows & outflows
Net cash flows from investing activities
Financing activities
Inflows & outflows
Net cash flows from financing activities
Net increase/decrease in cash proportions
Bank balance as at start -
Bank balance ending at -
