Statement of Cash Flows Flashcards
statement of cash flows is made up of 3 sections:
- operating
- investing
- financing
operating activities are prepared by the…
direct or indirect method
what are investing activities?
inflows and outflows related to long-lived property used in operations and in assets held for
investment purposes
TRUE OR FALSE
use of the indirect or direct method is irrelevant for investing activities
TRUE
what are some examples of investing activities?
-collection of principal on loans made by entity
-acquisition and disposal of long-term assets (PPE, intangibles, AFS debt securities, HTM securities)
-proceeds from a corporate owned life insurance policy
-major repairs (capitalized) to plant or equipment
what are financing activities?
involve issuing and repaying debt or equity include obtaining resources from owners and providing them with a return on (of) their investment
what are some examples of financing activities?
-proceeds from issuing equity instruments
-issuance of common and preferred stock
-treasury stock transactions
-dividends payment
-borrowing and repaying debt (principal payments)
what are operating activities?
include the cash flows related to the production of income
what is the direct method of operating activities?
lists the sources and uses of cash related to each account in NI, including non-cash items
what is the indirect method of operating activities?
reconciles net income to net cash flows by adjusting for changes in certain balance sheet operating
accounts for non-cash and non-operating items
TRUE OR FALSE
cash proceeds are an inflow under investing
true
TRUE OR FALSE
under indirect method the loss is added back to NI because it reduced net income reported
true
TRUE OR FALSE
gain increased NI, then it is deducted from NI
TRUE
TRUE OR FALSE
item decreased NI, item is added back to NI
TRUE
non-cash expense (bond discount, depreciation exp.) _______ NI and are __________
decreases; added back
________ bond discount (contra account to bonds payable) represents additional interest that was reported on income statement
decrease
discount amortization is non-cash item that __________ interest expense, reporting a _________ NI. discount amortization
is ___________ NI during reconciliation
increases, lower, added back to
TRUE OR FALSE
principal payments are reported as cash outflow under financing
TRUE
under GAAP, statement of cash flows requires
supplementary information that includes:
-the financial accounts (company’s cash equivalents policy)
-any restrictions affecting the accounts (pledged receivables)
-a summary of the non-cash transactions affecting investing and financing activities
Cash flow from the external financing of a business are classified as
Financing activities
Includes: cash received from the issuance of common and preferred stock, dividends paid to SH, and the issuance of bonds and other debt
Cash flow is related to the acquisition and disposition of assets (other than inventory and assets classified as cash equivalents) are….
Investing activities
The indirect method adjusts NI for..
Non cash items
The direct method reports..
The amounts actually paid or collected
