Sources and Uses Statement

Question 1

What is the purpose of a S&U statement?

Answer 1

Provide information about the cash receipts and cash payments of an entity during a period of time
See how the financial position changes during an accounting period

Question 2

Where does the information for the S&U statement come from?

Answer 2

Income statement and balance sheet

Question 3

S&U statement is the only statement?

Answer 3

That collects and shows in one place the causes of changes in cash during a financial reporting period

Question 4

Problem with Income Statement and Balance sheets compared to S&U statement?

Answer 4

They are based on the accrual basis so not recorded when the money is received but when it happens
S&U statement provides info about what our actual source and uses of cash are

Question 5

S&U statement Development Rules

Answer 5

Changes are calculated only for accounts
Only change needed for fixed assets is the change in NET fixed assets
Each is classified as either a source or a use

Question 6

Define Source of Cash

Answer 6

Decrease in asset accounts and increases in liabilities or owner’s equity

Question 7

Define Uses of Cash

Answer 7

Increase in assets and decrease in liabilities or owner’s equity

Question 8

If you are holding more money then it is a?

Answer 8

Source

Question 9

Increase in inventory?

Answer 9

Use of cash

Question 10

Decrease in notes payable?

Answer 10

Use of cash; paid it down

Question 11

Borrowed money form the bank?

Answer 11

Source of cash

Question 12

Increase amounts payable?

Answer 12

Source of cash

Question 13

Increase owner’s equity

Answer 13

Source of cash

Question 14

Marketable security

Answer 14

Use of cash

Question 15

Accounts receivable

Answer 15

Use of cash

Question 16

Prepaid expense

Answer 16

Use of cash

Question 17

Three changes to balance sheet statements?

Answer 17

1. Change in the owner’s equity account is examined to see how it occurred (increase in net income = increase OE by full amount)
2. Converts accrual based income to cash generated from operation of the pharmacy (depreciation is not a source of cash, so it shouldn’t be included)
3. Estimate the amount of cash spent on fixed assets for the year

Question 18

Estimate the amount of cash spent on fixed assets for the year really means?

Answer 18

You would subtract what our depreciation was from the total amount the next assets dropped and that will tell us what we spent on something new (long-term asset)

Question 19

Depreciation is a source or use of cash?

Answer 19

Use the total cost of depreciation as a source but the expenditure on that as as use

Question 20

Long term vs short term use?

Answer 20

Long term = less likely to get it back

Short term = you can get that money back

Question 21

Define Short Term Source of Cash

Answer 21

Increase in liability and decrease in current assets

Question 22

Define Short Term Use of Cash

Answer 22

Increase in current assets or decrease in current liabilities

Question 23

Define Long term Sources of cash

Answer 23

Net income plus depreciation, owner’s investment, increase in long-term debit, and net cash from sale of fixed assets

Question 24

Define Long term Uses of cash

Answer 24

Owner withdraws
Decrease in long-term debt
Expenditures on fixed assets