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26 Cards in this Set
- Front
- Back
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Cash Flow from Operations Indirect Method |
Start with Net Income Add back in depreciation Subtract increases in Accounts receivables prepaid inventory gains on sales (i.e. ASSET ACCOUNTS) (Subtract if the accounts increase) Add increases in accounts payable (subtract if decreases) |
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Primary purpose of statement of cash flows |
To provide relevant information about cash receipts and cash payments of an enterprise during a period |
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Cash and cash equivalents are reported how and where on statement of cash flows |
No where they are not reported at all |
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Interest payments are included |
Operating activities |
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Payments to acquire equity in another company is included |
Investing activities |
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Investing activities |
All transactions related to the making or collecting of loans and the acquiring and disposing of debt / equity of other companies PPandE or a business unit |
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Using the direct method |
Cash collected from customers includes sales revenue plus collections of AR from previous year LESS recorded sales not yet received in cash |
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The direct method presents major classes |
Cash collected from customer Interest and dividends received Interest paid Cash paid to employees and suppliers Income taxes paid other cash payments |
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Which method of statements of cash flow does FASB prefer |
FASB |
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Proprietary funds and government entities engaged in business are required to use what method of statement of cash flow |
Direct method |
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If direct method is used what needs to be provided in supplemental information |
A reconciliation of net income to cash provided by operating activities Adjustments to all major classes |
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Cash flows for financing activities include |
Other principal payments to creditors who have extended long-term credit only the principal portion of monthly lease payment would be reported here |
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You have a 20 year loan with principal payment of 20,000 and interest of 10,000 how is this reported in statement of cash flows |
Add in the 10,000 in Operations Subtract out the 10,000 in Financing |
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What must be disclosed in statement of cash flows |
Information about all investing and financing activities that affect recognized assets and liabilities but DOES NOT result in cash receipts / payment- for example converting debt into equity |
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Cash inflows from investing actvities |
Receipts from sale of PPE and other productive assets ADD |
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Cash Outflows investing activities |
Payments AT TIME OF PURCHASE or soon before / after acquisition |
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Bank overdafts are reported where |
Operating activity IFRS Financing under GAAP |
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Interest and dividends received are reported where |
Operating or investing under IFRS ONLY operating GAPP |
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IFRS must present |
2 years comparative periods |
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under GAAP are you required to provide comparative period cash flow statements |
no only under IFRS |
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Dividends paid are |
Financing If you are asked to reconcile operating to net income and they include a dividend payment IGNORE |
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Amortization of bond discount is classified |
As interest expense and needs to be added back in to Net Income under operating activities |
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Cash flows per share |
SHOULD NEVER EVER BE REPORTED OR SHOWN |
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The cash proceeds from a shale of used equipment would be |
Treated as a cash inflow from investing since the cash should include both carry value and gain from sale this gain needs to be DEDUCTED from income in operating to avoid double counting (of course if it is a loss it needs to be ADDED) |
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Income taxes paid during the year as well as interest paid during the year |
Are required disclosures as well as preferred stock dividend |
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Retirement of bonds |
Financing activity |
