Chapter 11: Statement of Cash Flows

Accounts Payable

Amounts to be paid in the future for goods or services already acquired. "On account."

Financing activities

Cash flow activities that include (a) obtaining cash from issuing debt and repaying the amounts borrowed and (b) obtaining cash from stockholders, repurchasing shares, and paying dividends.

Cash received by the company during a period is called what?

Cash inflow

Cash flows from___________ activities include both inflows and outflows of cash from the external funding of a business.

Financial

Issuing common stock, payment of cash dividends, and purchasing treasury stock are all examples of what type of activities in the statement of cash flows?

Financing activities

A decrease in accounts payable represents a cash ______ from operating activities, whereas a decrease in accounts receivable represents a cash _____ from operating activities.

Outflow, Inflow

Accrued Revenues

Revenues earned but not yet received in cash or recorded

Notes Payable

Short-term or long-term liabilities that a business promises to repay by a certain date.

In a statement of cash flows, the sum of cash inflows and outflows is equal to?

The change in cash balance

Non-operating activities

Various revenues, expenses, gains, and losses that are unrelated to a company's main line of operations.

Accrued expenses

expenses incurred but not yet paid in cash or recorded

non cash activities

transactions that do not impact cash and will typically only involve long- term assets by issuing debt, long-term assets by issuing stock, conversion of bonds payable into common stock, and exchange of long term assets.

The statement of cash flows classifies items as...

1.) Operating 2.) Investing 3.) Financing

Direct method

A method of determining net cash provided by operating activities by adjusting each item in the income statement from the accrual basis to the cash basis. The direct method shows operating cash receipts and payments.

Indirect method

A method of preparing a statement of cash flows in which net income is adjusted for items that do not affect cash, to determine net cash provided by operating activities.

Which of the following items are classified as cash outflows from operating activities on the statement of cash flows? A.) Payment on account payable B.) Interest paid on bonds C.) Purchase of a building D.) Retirement of common stock E.) purchase of supplies

A, B, E

Adjustments to net income in calculating operating cash flows include which of the following? A.) Changes in noncurrent assets and noncurrent liabilities B.) Changes in current assets and current liabilities C.) Noncash items D.) Nonoperating items

A, C, D

Accounts Receivable

Amounts to be received in the future due to the sale of goods or services.

Investing activities

Includes cash transactions involving the purchase and sale of long-term assets and current investments

The financial statement that provides information about cash receipts and cash disbursements for the period is the....

Statement of Cash Flows

Accrual basis

revenues are recognized when earned and expenses are recognized when incurred

Adjustments to net income in calculating operating cash flows include which of the following? A.) Non operating items B.) Non cash items C.) Changes in non current assets and non current liabilities D.) Changes is current assets and current liabilities

A, B, D

Which of the following cash transactions are classified as cash inflows from investing activities? A.) Sale of equipment B.) Sale of merchandise inventory C.) Sale of building D.) Sale of investments E.) Borrowing from bank

A, C, D

Which of the following are classified as cash inflows from investing activities? A.) Purchase of an investment B.) Issuance of common stock C.) Sale of land D.) Sale of equipment

C & D

Cash paid by the company during a period is called what?

Cash outflow

List the 4 steps in order of preparing the statement of cash flows...

Step 1: Calculate net cash flow from operating activities Step 2: Calculate net cash flow from investing activities Step 3: Calculate net cash flow from financing activities Step 4: Combine the operating, investing, and financing and make sure the total of the three activities equals the amount of cash reported in the balance sheet from this year versus last year (the change in cash).

What is net cash flows and how is it calculated?

The difference between cash inflows and cash outflows. Cash inflows - Cash outflows = Net Cash Flow

Operating activities

includes cash receipts and cash payments for transactions relating to revenue and expense activities

Which of the following are common financing activities? A.) Receiving dividends from an investment in another company B.) Issuing common stock C.) Payment of cash dividends D.) Borrowing money

B,C,D