MD#3 : The Statement of Cash Flows (1st Grading Period)

Question 1

• It summarizes the cash receipts and cash disbursements for the accounting period.
• It summarizes the cash activities of the business by classifying cash inflows (receipts) and cash outflows (payments) into operating, investing and financing activities.

Answer 1

Statement of Cash Flows

Question 2

Components of the Statement of Cash Flows Classified According To Activities

Answer 2

• Operating Activities
• Investing Activities
• Financing Activities

Question 3

• These are the cash inflows (receipts) and the cash outflows (payments) arising from the normal operations of the business.

Answer 3

Operating Activities

Question 4

Receipts of Cash in Operating Activities

Answer 4

1. Collections from customers for the performance of services or sale of goods.
2. Royalties, fees, commissions received.
3. Interest, dividends and other income received

Question 5

Payments of Cash in Operating Activities

Answer 5

1. To suppliers for services and goods acquired.
2. Employees’ salaries.
3. Government licenses and taxes.
4. Interest expense
   Other operating expenses.

Question 6

• These are the cash inflows (receipts) and the cash outflows (payments) from the purchase and sale of property and equipment, investment in debt or trading securities, lending
  money and collection of the principal amount of the money loaned.

Answer 6

Investing Activities

Question 7

Receipts of Cash in Investing Activities

Answer 7

1. Proceeds from the sale of property and equipment.
2. Inflow: proceeds from the sale of marketable securities.
3. Sale of fixed assets.
4. Sale of investment securities.
5. Collection of loans and insurance proceeds.

Question 8

Payment of Cash in Investing Activities

Answer 8

1. Purchase of PP&E including software and website development.
2. Purchase of marketable securities.
3. Acquisitions, net of cash acquired.
4. Purchase of fixed assets.
5. Purchase of investments such as stocks or securities;
6. Lending money.

Question 9

• These are the cash inflows (receipts) and the cash outflows (payments) from the owners and creditor of the business.

Answer 9

Financing Activities

Question 10

Receipts of Cash in Financing Activities

Answer 10

1. Original and additional investments by owner.
2. Proceeds of loan.

Question 11

Payments of Cash in Financing Activities

Answer 11

1. Cash withdrawal of owner.
2. Payment for the principal balance of loan.