WEEK 4 (FINANCIAL POSITION AND CASH FLOWS)

Question 1

Statement of Financial Position format and classification

Answer 1

Assets:
Current assets
Long-term investments
PP&E
Intangible Assets
Other Assets

Liabilities and Equity
Current Liabilities
Long-term debt
Shareholders’ equity
Capital shares
Contributed surplus
Retained earnings
Accumulated other comprehensive income/other surplus

Question 2

Define current assets

Answer 2

Assets expected to be realized within one year from balance sheet date or within the normal operating cycle (whichever is longer)

Generally presented in order of liquidity

Question 3

Define working capital

Answer 3

Current assets - Current liabilities (key indicator of the company’s short-term liquidity)

Question 4

Other additional information reported in SFP

Answer 4

Accounting policy
Contractual situation
Additional detail
Contingencies and provisions
Subsequent evens after the reporting period

Question 5

Explain the concept of provisions and contingencies

Answer 5

IFRS 37
Called provisions will be recognized if it is probable and can be estimated reliably

ASPE 3290
Called contingency will be recognized if likely and reasonable estimated

Liability:
DR Accrued loss
Cr Accrued liability

Assets:
No journal entry needed

Question 6

What do you do if there is an event that occurs after a reporting period?

Answer 6

adjust if it happened during the fiscal year
dont adjust but disclose if it happened after the fiscal year

Question 7

Define the statement of cash flows

Answer 7

To asses the firms ability to generate cash and cash equivalents

Question 8

Cash activities categories

Answer 8

Operating, Investing, and Financing Activities

Question 9

Usefulness of the statement of cash flows

Answer 9

Liquidity, flexibility, cash flow patterns, free cash flow

Question 10

Define free cash flow

Answer 10

Discretionary cash flow, or cash left to invest and expand after deducting net cash from operations to cap ex and dividends