Week 8- Statement of Cash flows Flashcards
Is the statement of cash flows based on the accrual basis?
No, it purely looks at when cash is received or paid
What are the three categories inside a SoCF
Operating activities
Investing activities
Financing Activities
Why is a SoCF important?
we need to know what money is coming in and out so that we can pay loans and staff on time
What does the category of operating activities represent?
The statement of P or L (expenses)
what does the category of investing activites represent?
Non current assets ( plus interest income)
what does the financing activities represent?
Equity and liabilities (and interest paid)
How is the final “cash at the end of the year” figure calculated?
the net inflow/outflow from each of these sections is added/subtracted from the cash at the beginning of the year
Is there an inflow or outflow of cash if you buy more assets
Outflow
Is there an inflow or outflow of cash if you sell assets?
Inflow
Is there an inflow or outflow of cash if your liabilities are increasing( you take out a loan)
Inflow
Is there an inflow or outflow of cash if your liabilities are decreasing ( to pay off a loan)
Outflow
Name some examples of the accounts you would find under operating activities
Profit for the year, Depreciation, tax paid, trade receivables, trade payables, inventories, Amortization of non tangible assets, Profit on disposal of plant, property and equipment
Name some examples of the accounts you would find under financing activities
dividends paid, proceeds from the sale of share capital, Repayment of the current portion of long term borrowings, Increase in long term borrowings
Define what business entity means
The separation between the business and the owner/s
Define what consistency means
making sure you are consistent on how you apply the principles
