Statement of cash flows

Question 1

SCF: True or false: the statement of cash flows are prepared on the accrual basis of accounting.

Answer 1

False - they are prepared on the cash basis of accounting.

Question 2

SCF: What does the cash basis mean?

Answer 2

That income is recognised when it is received and expenses are recognised when they are paid for.

Question 3

SCF: What does the cash flow statement show?

Answer 3

The inflows and outflows of cash that resulted in a change in cash and cash equivalents throughout the reporting period.

Question 4

SCF: True or false: when assets increase, cash decreases.

Answer 4

True

Question 5

SCF: Name the 3 cash-generating activities.

Answer 5

Operating, investing, and financing

Question 6

SCF: True or false: increase in trade RECEIVABLES is shown in brackets, i.e is negative

Answer 6

True - this is because the increase was not due to cash.

Question 7

SCF: True or false: if trade receivables decrease, it indicates a cash inflow.

Answer 7

True.

Question 8

SCF: True or false: a decrease in trade PAYABLES is shown in brackets, i.e is negative

Answer 8

True - this indicates payment for goods or services

Question 9

SCF: What is the calculation for net expenses?

Answer 9

Total net expenses adjusted for non-cash items, separately disclosed items, and changes in inventories and trade payables. Usually cost of sales adjusted for other items in SCI.

Question 10

SCF: True or false: increase in inventories is shown in brackets.

Answer 10

True