Pas 7 Statement of Cash Flows Flashcards
Presentation of a Statement of Cash Flows is what PAS/IAS?
PAS 7/IAS 7
IAS 7 requires statements of cash flows to report _______ during the period classified by operating, investing and financing activities
cash flows
Objective of IAS 7/The aim of IAS 7 is to ?
provide information to users of financial statements about the
entity’s ability to generate cash and
cash equivalents, as well as indicating
the cash needs of the entity
provides information about the sources and utilization (i.e., historical changes) of cash and cash equivalents during the period.
The statement of cash flows
The statement of cash flows presents cash flows according to the following classifications:
- Operating activities
- Investing activities
- Financing activities
compromises cash on hand and demand deposits.
Cash
are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
Cash equivalents
are inflows and outflows of cash and cash equivalents.
Cash flows
are the principal revenue-producing activities of the entity and other activities that are not investing or financing activities.
Operating activities
are the acquisition and disposal of non-current assets and other investments not included in cash equivalents.
Investing activities
are activities that result in changes in the size and composition of the equity capital and borrowings of the entity
Financing activities
Operating activities include transactions that enter the determination of ________/________. These transactions
normally affect _____________ accounts.
profit or loss.
income statement
Investing activities include transactions that affect ________ assets and other ______________ assets.
long-term
non-operating
Financing activities include transactions that affect ________ and _______________
equity
non-operating liabilities (/borrowings)
ANALYZE & IDENTIFY WHAT ACTIVITIES ARE THESE?
a. cash receipts from the sale of goods, rendering of services, or other forms of income
b. cash payments for purchases of goods and services
c. cash payments for operating expenses, such as employee benefits, insurance, and the like, and payments or refunds of income taxes
d. cash receipts and payments from contracts held for dealing or trading purpose
Operating Activities
ANALYZE & IDENTIFY WHAT ACTIVITIES ARE THESE?
a.cash receipts and cash payments in the acquisition and disposal of property, plant and equipment, investment property, intangible assets and other noncurrent assets
b.cash receipts and cash payments in the acquisition and sale of equity or debt instruments of other entities (other than those that are classified as cash equivalents or held for trading)
c. cash receipts and cash payments on derivative assets and liabilities (other than those that are held for trading or classified as financing activities)
d.loans to other parties and collections thereof (other than loans made by a financial institutions)
Investing Activities
ANALYZE & IDENTIFY WHAT ACTIVITIES ARE THESE?
a. cash receipts from issuing shares or other equity instruments and cash payments to redeem them
b. cash receipts from issuing notes, loans, bonds and mortgage payable and other short-term or long-term borrowings, and their repayments
c. cash payments by a lessee for the reduction of the outstanding liability relating to a lease.
Financing Activites
When preparing statement of cash flows:
Which one are you gonna include and exclude?
• the transactions that have affected cash and cash equivalents (e.g., purchase ofassets by paying cash).
• transactions that have not affected cash and cash equivalents (e.g., purchase ofassets by issuing note payable or shares ofstocks).
1st one- Include
2nd one- Exclude
Cash flows from/ for
Interest income received
Opt1: Operating activity
Opt2: Investing activity
Cash flows from/ for
Interest expense paid
Opt 1: Operating activity
Opt 2: Financing activity
Cash flows from/ for
Dividend income received
Opt 1: Operating activity
Opt 2: Investing activity
Cash flows from/ for
Dividend paid to owners
Opt1: Financing activity
Opt2: Operating activity
Two Methods for Reporting cash flows from operating activities
Direct Method
Indirect Method
- shows each major class of gross cash receipts and gross cash payments.
Direct method
