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AC > Statement Of Cash Flows > Flashcards

Statement Of Cash Flows Flashcards

1
Q

Net cash flow

A

Cash received less all cash paid out

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2
Q

Arguably most important for going concern?

A

Cash flow

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3
Q

Benefits of statements of cash flows

A
  1. Factual/objective (no policies or estimates)
  2. Easily understood
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4
Q

Cash flow statement uses

A
  1. Extra info
  2. Assess future prospects
  3. Assess adaptability
  4. Check amounts can be paid as due
  5. Comparison (though standard headings)
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5
Q

Statement of cash flows format

A

Cash flows from operating activities
Cash generated from operations
Interest paid
Income taxes paid
Net cash from operating activities

Cash flows from investing activities
Purchase of PPE
Proceeds of sale of equipment
Interest received
Dividends received
Net cash used in investing activities

Cash flows from financing activities
Proceeds of issue of shares
Repayment of loans.
Dividends paid
Net cash used in financing activities

Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period

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6
Q

Cash definition

A

Cash in hand and deposits available on demand

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7
Q

Cash equivalents definition

A

Liquid assets with a maturity date less than 3 months in the future

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8
Q

Which figure on the SFP reconciles to the change in cash and cash equivalents?

A

Difference between b/f and c/f cash figure kn SFP

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9
Q

What is a bank overdraft treated as in the SCF

A

A negative cash balance

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10
Q

2 methods of calculating cash generated from operations

A
  1. Direct method
  2. Indirect method
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11
Q

Direct method for calculating cash from operations

A

Cash sales
+ cash received from credit customers
- cash purchases
- cash paid to credit suppliers
- cash expenses

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12
Q

Which method does IAS 7 prefer for calculating operating cash flows?

A

Direct method

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13
Q

Indirect method for calculating cash from operations

A

Profit before tax
+ finance costs
- investment income
+ depreciation charge
+/- loss/profit on disposal of non-current assets
+ amortisation charge
-/+ increase/decrease in inventories
-/+ increase/decrease in trade receivables
+- increase/decrease in trade payables

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14
Q

Indirect method adjustment: Finance cost

A

Added back to profit because not part of cash from operations and may include accrued (I.e. non-cash) amounts

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15
Q

Indirect method adjustment: investment income

A

Deducted as not part of cash from operations (belongs to cash flows from investing activities)

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16
Q

Indirect method adjustment: depreciation/amortisation

A

Added back because not a cash item

17
Q

Indirect method adjustment: Disposal

A

Added back because non-cash items

18
Q

Indirect method adjustment: Decrease in inventories

A

Added on because decrease in inventories liberates extra cash

19
Q

Indirect method adjustment: increase in trade receivables

A

Deducted because this income not yet realised as cash

20
Q

Indirect method adjustment: decrease in trade payables

A

Deducted because reduction in payable’s must reduce cash. Must have paid suppliers if you owe less.

21
Q

Other cash outflows from operating activities may include

A
  1. Interest paid
  2. Income taxes paid
22
Q

Calculaton of interest/income taxes paid

A
  1. Charge to profits (P&L)
  2. Opening/closing payable balance (BS)
23
Q

Investing activities cash inflows may include

A
  1. Interest received
  2. Dividends received
  3. Proceeds of sales of equipment
24
Q

Investing activities cash outflows may include

A

Purchase of PPE

25
Q

Calculation of interest and dividends received

A
  1. Income receivable (P&L)
  2. Any relevant opening+closing receivables (BS)
26
Q

Calculating purchase of PPE and Proceeds of sale of equipment: Accounts required

A
  1. Cost
  2. Accumulated depreciation
  3. Disposals
27
Q

What to do if there is insufficient detail to produce separate cost and accumulated depreciation accounts

A

Use a carrying amount account

PPE carrying amount

28
Q

PPE carrying amount calculation

A

b/f amount
+ additions
- disposals at CA
- depreciation charge for year

=c/f amount

(Remove any non cash additions to this figure)

29
Q

Financing activities: cash inflows may include

A
  1. Proceeds of issues of shares
  2. Proceeds of issue of loans/debentures
30
Q

Financing activities: cash outflows may include

A
  1. Repayments of loans/debentures
  2. Dividends paid
31
Q

Calculation of proceeds of issue of shares

A

Compare b/f and c/f on:

  1. Share capital
  2. Share premium
32
Q

Calculation of proceeds of issue of loans/repayments of loans

A

Subtracting b/f balance from c/f balance

33
Q

Calculation of dividends paid

A

Use a retained earnings account

Ordinary dividends are accounted for when paid and irredeemable preference dividends are paid on an accruals basis

AC (15 decks)

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