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Summary Ch 14 Statement of Cash Flows - Financial Accounting with International Financial Reporting Standards - FAC2 CA$10.00
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Summary Ch 14 Statement of Cash Flows - Financial Accounting with International Financial Reporting Standards - FAC2
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  • Course
  • FAC2
  • Institution
  • Hanzehogeschool Groningen (Hanze)
  • Book
  • Financial Accounting with International Financial Reporting Standards

Provides in-depth summary of chapter 14. topics include format of statement, Indirect and Direct Methods. includes examples.

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  • February 12, 2024
  • 17
  • 2023/2024
  • Summary

Subjects

  • cash flow
  • direct
  • indirect
  • non cash activities

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  • International Business and Management Studies
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Content preview

Statement of Cash Flows
Chapter Number Chapter 14



📖 Table of Contents

Outline
14.1 Statement of Cash Flows: Usefulness and Format
Significant Non-Cash Activities
Format of the Statement of Cash Flows
14.2 Preparing the Statement of Cash Flows
Indirect and Direct Methods
Indirect Method
Step 1: Operating Activities
Adjustment 1: Depreciation Expense
Adjustment 2: Gain / Loss on Disposal of Plant Assets
Adjustment 3: Changes to Non-Cash Current Assets & Current Liabilities
Step 2: Investing and Financing Activities
Adjustment 1: Change in Non-Current Assets (Investing)
Adjustment 2: Change in Non-Current Liabilities (Financing)
Step 3: Net Change in Cash
Direct Method
Step 1: Operating Activities
Adjustment 1: Cash Receipts from Customers - (Sales Revenue)
Adjustment 2: Cash Payments to Suppliers - (Cost of Goods Sold)
Adjustment 3: Cash Payments for Operating Expenses
Adjustment 4: Depreciation Expense and Loss on Disposal of Plant Assets
Adjustment 5: Cash Payments for Interest
Adjustment 6: Cash Payments for Income Taxes
Step 2: Investing and Financing Activities (Same as Indirect Method)
Adjustment 1: Change in Non-Current Asset (Investing Activities)
Adjustment 2: Change in Non-Current Liability (Financing Activities)
Step 3: Net Change in Cash
14.3 Using Cash Flows to Evaluate a Company
14.4 Statement of Cash Flows—T-Account Approach




14.1 Statement of Cash Flows: Usefulness and Format
The information in a statement of cash flows should help investors, creditors, and others assess:

1. The entity’s ability to generate future cash flows

2. The entity’s ability to pay dividends and meet obligations




Statement of Cash Flows 1

, 3. The reasons for the difference between net income and net cash provided (used) by operating activities

4. The cash investing and financing transactions during the period




Significant Non-Cash Activities
1. Direct issuance of ordinary shares to purchase assets.

2. Conversion of bonds into ordinary shares.

3. Direct issuance of debt to purchase assets.

4. Exchanges of plant assets.



⚠️ You will report these activities as a separate note or supplementary schedule



Format of the Statement of Cash Flows




Statement of Cash Flows 2

, 14.2 Preparing the Statement of Cash Flows
The information to prepare this statement usually comes from three sources:

Comparative statements of financial position (balance sheet).

Information in the balance sheet indicates the amount of the changes in assets, liabilities, and equities from the
beginning to the end of the period.

Current income statement.

Information in this statement helps determine the amount of net cash provided or used by operating activities
during the period.

Additional information.

Such information includes transaction data that are needed to determine how cash was provided or used during
the period.




Statement of Cash Flows 3

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