Acc 2020 Ch 13

Front 1

Cash Flows (Definition)

Back 1

Cash Receipts and Cash Payments

Front 2

Statement of Cashflows

Back 2

- Shows where cash came from and how cash was spent
- Reports why cash increases or decereased during the period.
- Covers a time span and is dated the same as the income statement.
- Explains why Net Income may not equal the change in the cash balance

Front 3

3 ways people use CashFlow information

Back 3

1. Predict future cash flows
2. Evaluate management decisions
3. Predict ability to pay cash and dividends.

Front 4

Cash Equivalents

Back 4

Highly liquid Investments that can be converted to cash quickly.
-Ex. Money market accounts, and investments in U.S. securities.

Front 5

3 basic types of cash-flow activities

Back 5

Operating activities
Investing Activities
Financing Activities

Front 6

Operating Activities section of the statement of Cashflows

Back 6

- Most important categories
- Reflects Day to Day opeartions that determine the future of the organization.
- Creates revenues, expenses, gains, and losses.
- Affect net income on the income statement
- Affect current assets and current liabilities on the balance sheet

Front 7

Investing Activities section of the statement of Cashflows

Back 7

- Increase and decrease long term assets, such as computers, software, land, buildings, and equipment.
- Include purchases and sales of these assets, plus loans receivable from others and collection of those loans.

Front 8

Financing Activities section of the statement of cashflows

Back 8

- Increase and decrease long term liabilities and equity
- Include issuing stock, paying dividends, and buying and selling treasury stock.
- Include borrowing money and paying off loans.

Front 9

2 ways to format operating activities on the statement of cashflows

Back 9

- The Indirect Method
- The Direct Method

Front 10

The Indirect Method

Back 10

-Starts with Net Income and adjusts it to net cash provided by operating activities.

Front 11

The Direct Method

Back 11

- Restates the Income Statement in terms of cash. -Shows all cash receipts and all the cash payments from operating activities.

Front 12

The Direct and Indirect Methods

Back 12

- Use different computations but produce the same amount of cashflow from operations
- Have no effect on investing activities or financing activities.