S2: Financial Statements & Cash Flow

Question 1

Statement of Cash Flows

Answer 1

Summarizes the sources and uses of cash over a period

Question 2

Operating activity

Answer 2

Adjustments to NI due to cash provided or used in the firm’s operations

Question 3

Investing Activity

Answer 3

Cash changes hands due to purchasing or disposal of long-term and fixed assets

Question 4

Financing Activity

Answer 4

Cash changes from issuing or repaying debt, or issuing and repurchasing stock, and paying dividends

Question 5

Accrual Accounting

Answer 5

GAAP usually requires revenue to be reported at the TIME OF SALE or when expenses ARE INCURRED, not necessarily at time of cash collection.

Question 6

Matching Principle

Answer 6

The cost associated with making a product are recognized when the product is sold (matches cost with profit)