STATEMENT OF CASH FLOWS Flashcards
A _______________ is an essential component within the set of basic financial statements.
statement of cash flows
It provides information about the cash receipts and cash disbursements of an entity during a period.
statement of cash flows
As an analytical tool, it is useful in determining the short-term viability of an entity, particularly its ability to pay its obligations
statement of cash flows
include making and collecting loans and acquiring and disposing of investments (both debt and equity) and property, plant, and equipment.
Investing activities
involve the cash effects of transactions that enter into the determination of net income.
Operating activities
involve liability and owners’ equity items. They include (a) obtaining resources from owners and providing them with a return on their investment, and (b) borrowing money from creditors and repaying the amounts borrowed
Financing activities
Expense items that decrease the net
income but have no cash effect
Depreciation
Portion of purchases for the period does
not form part of the cost of goods sold;
hence, profit is increased
Increase in inventory
Cost of goods sold includes goods
purchased and paid in prior year
Decrease in inventory
Payments during this period exceed related
expenses shown in the income statemen
Increase in prepaid
expenses
Expenses exceed related payments to
suppliers and others
Increase in trade
payables and accrued
expenses
Expenses recognized during this period
exceed related payments for goods and
services
Decrease in prepaid
expenses
The gain increases (loss decreases) the
net income but the cash effect is shown in
the investing activities section
Gain or loss on sale of
assets
