Week 6

Question 1

Operating activities

Answer 1

Cash flows primarily derived from; Principal revenue-producing activities of the entity and other activities that are not investing or financing activities

A key indicator of the extent to which the operations of the entity have generated sufficient cash flows to;

Repay loans
Maintain operating capability
Pay dividends
Make new investments

Question 2

Examples of cash inflows from operating activities (5)

Answer 2

Receipts from the sale of goods or rendering of services, including non-core sources

Receipts from current period’s sales and services provided for cash

Receipts form previous period’s sales and services i.e. accounts receivable

Receipts from future sales and services i.e. unearned revenue

Receipts from other revenue e.g. royalties, fees, commissions

Question 3

Examples of cash outflows from operating activities (2)

Answer 3

Payments to suppliers of all goods and services

Regardless of the period the G&S are received or consumed

Question 4

Investing activities

Answer 4

Long-term assets

Other investments not included in cash equivalents

Question 5

Examples of cash flows from investing activities (4)

Answer 5

Payments to acquire or invest in, and Proceeds from disposals or maturity of;

PPE, intangibles or other long-term assets

Business and shares in other companies

Long-term interest-bearing deposits

Principal relating to loans to employees and other entities

Question 6

Financing activities

Answer 6

Cash flows that result in changes in the size and composition of the contributed equity and interest-bearing liabilities of the entity

Useful in predicting claims on future cash flows by providing of capital (i.e. debt and equity) to the entity

Question 7

Examples of cash flows from financing activities (4)

Answer 7

Proceeds from issuing shares

Payments to acquire shares from owners (i.e. buy-backs)

Proceeds from borrowings or issuing debt

Repayments of principal related to borrowings or lease liabilities

Question 8

Interest and dividends

Answer 8

Cash flows from interest and dividends received and paid shall be disclosed separately

Each shall be classified in a consistent manner from period to period as either operating, investing or financing activities

Question 9

Taxes on income

Answer 9

Cash flows arising from taxes on income shall be separately disclosed and shall be classified as operating activities

Question 10

Reconciling cash and cash equivalents

Answer 10

An entity shall disclose the components of cash and cash equivalents and shall present a reconciliation of the amounts in its statement of cash flows with the equivalent items reported in the statement of financial position