Statement of Cash Flows - 17 Flashcards
Statement of Cash Flows is typically the third financial statement prepared?
Yes
The Statement of Cash Flows is basically converting from the Accrual Basis to the Cash Basis?
Yes
Key Words:
- Cash Equivalents
- Financing Activities
- Investing Activities
- Operating Activities
- Reconciliation of Net Income
- Direct Method (Direct Presentation)
- Indirect Method (Indirect Pres)
- Significant Non-Cash Investing & Financing Activities
- Treasury Bills (T-Bills)
- Commercial Paper
- Certificates of Deposit (CD)
- Money Market
Statement of Cash Flow should explain what?
Changes in Cash & Cash Equivalents which include highly liquid investments
Examples of Cash Equivalents?
- Treasury Bills
- Commercial Paper - Short Term Liability issued by company
- Money Markets
- Certificates of Deposits (as long as there is no penalty for early withdrawal)
Cash Equivalent must have an original maturity time period of what?
3 months from date of purchase
Are you allowed to net checking account balances from different banks?
No
If you had a negative balance in Bank A and a positive balance in Bank B, how would you treat the negatiev balance in Bank A?
As a short term liability
What are the two methods of presentation on the Statement of Cash Flows?
- Direct
- Indirect
*These methods only cause differences in the operating section and the disclosures
The Statement of Cash Flows requires what other financial statements to compute?
- Income Statement for the current period
2. Balance Sheet as of End of Current Period and End of Previous Period
What do the different activities focus on?
Operating - Income Statement
Investing - Assets on BS
Financing - Liab & SHE on BS
How is the Direct Method calculated?
Take each revenue and each expense and convert from Accrual Basis to Cash Basis
How is the Indirect Method calculated?
Take Net Income and reconcile to cash from operating activities
What must be disclosed under the Indirect Method?
- Income Taxes Paid
2. Interest Paid
What must be disclosed under the Direct Method?
- Reconciliation of NI to Cash from Operating Activities (Basically the Indirect Method)
What must be disclosed under both methods?
- Policy and treatment for Cash Equivalents in Significant Accounting Policies
- Significant Non-cash Investing & Financing Activities
Operating Activities:
- Cash received from customers
- Cash received from interest
- Cash received from dividends
- Cash received from sales of securities classified as trading
- Cash paid to suppliers
- Cash paid for operating expenses
- Cash paid for interest
- Cash paid for income taxes
- Cash paid for securities classified as trading
Investing Activities:
- Proceeds from sales of PPE
- Proceeds from sales of investments in stocks & bonds classified as AFS & HTM
- Cash paid for securities classified as trading
- Proceeds from the sale or redemption of investments in bonds classified as HTM
- Proceeds from collection of loans (principal only)
- Proceeds from selling components of the company
- Acquisition of PPE (Capital Expenditures)
- Acquisition of investments in stock and bonds (AFS or HTM)
9 Making loans to other entities - Acquiring other businesses
Financing Activities:
- Proceeds from issuing C/S and P/S
- Proceeds from reissuing T/S
- Proceeds from issuing short term debt
- Proceeds from issuing long term debt
- Paying cash dividends
- Repurchasing C/S (T/S)
7 Repaying short-term loans (principal only) - Repaying long-term loans including capital lease obligations (principal only)
Non-Cash Investing & Financing Activites (Reported in a separate schedule)
- Acquiring an asset through a capital lease
- Conversion of debt to equity
- Exchange of noncash assets or liabilities for other non-cash assets or liabilities
- Issuance of stock to acquire assets
Direct Method:
- Cash Collected from Sales
IS - Sales; BS - A/R, Gross - Interest Received
IS - Int Rev; BS - Int Rec. - Dividends Receved
IS - Div. Rev; BS - Div Payable - Cash Paid to Employees
IS - Salaries & Wages Exp; BS - Salaries & Wages Payable - Cash Paid to Supplies
IS - COGS/COS; BS - Inventory/A/P - Interest Paid
IS - Int. Exp; BS - Int Payable, Bond Discount & Premium - Income Taxes Paid
IS - IT Exp; BS - IT Payable, DITA, & DITL - Other Operating Cash Pmts
- Rent Paid
IS - Rent Exp; BS - Prepaid Rent & Rent Payable - Cash Pmts for Supplies
IS - Supplies Exp; BS - Supplies
- Rent Paid
For the Direct Method, you would use the Fake Cash Method?
Yes, Take the increase or decrease of the Balance Sheet accounts and apply that as a journal entry. The offsetting journal entry would be to Fake Cash in which a debit would be an inflow of cash and a credit would be an outflow of cash
Under the Direct Method, Revenues & Expenses are what types of cash flows?
Revenues = Inflows Expense = Outflows
What do you add back into Net Income under the Indirect Method for Operating Activities?
- Decreases in Current Assets
- Increases in Current Liabilities
- Depreciation/Depletion/Warranty/Bad Debt Expense
- Amortization of Intangible Assets
- Bond Discount Amortization
- Losses
What do you subtract from Net Income under the Indirect Method for Operating Activities?
- Increase in Current Assets
- Decreases in Current Liabilities
- Bond Premium Amortization
- Gains
Under IFRS, where may interest and dividends received be reported?
Operating or Investing
Under IFRS, where may interest and dividends paid be reported?
Operating or Financing
Under IFRS, where may the cash from the purchase and sale of trading securities be reported?
Operating (US GAAP = Operating or Investing)
Under IFRS, other types of taxes (other than income taxes) may be reported where?
Investing or Financing
Under IFRS, the effects of non-cash transactions must be disclosed wehre?
In the notes to the FS
