Statement of Cash Flows

What is reported on the Statement of Cash Flows?

1. Information about the cash receipts and cash payments for an entity; 2. The difference between net income and net operating cash flows; 3. Information about investing and financing activities which do not involve cash inflows or outflows.

List the required categories for the Statement of Cash Flows.

1. Net cash inflow or outflow from Operating Activities; 2. Net cash inflow or outflow from Investing Activities; 3. Net cash inflow or outflow from Financing Activities; 4. Effects of Foreign Currency Translation; 5. Reconciliation of net cash inflows/outflows with the reported change in cash and cash equivalents on the Balance Sheet; 6. Non-cash Investing and Financing Activities.

Name the four major sections in the direct method cash flow statement.

1. Operating cash flows; 2. Investing cash flows; 3. Financing cash flows. 4. Reconciliation of net income and net operating cash flows.

What are some examples of cash outflows classified as Investing Activities?

1. Purchase of long-term assets; 2. Lending to others; 3. Investment in debt and equity securities held to maturity and available for sale); 4. Purchase of productive assets (not inventory).

What are some examples of cash outflows classified as Financing Activities?

1. Repurchase of own stock; 2. Paying back lenders (principal only); 3. Payment of dividends.

What are some examples of cash inflows classified as Investing Activities?

1. Sale of long-term assets; 2. Collection of loan principal; 3. Disposal of held-to-maturity (HTM) and available-for-sale (AFS) debt and equity securities; 4. Sale of productive assets (not inventory).

What are some examples of cash inflows classified as Financing Activities?

1. Sale of own stock; 2. Proceeds from borrowing.

Using the indirect method for reporting cash flows from operations, should a decrease in inventory be added to or subtracted from accrual based net income?

A decrease in inventory should be added.

Using the indirect method for reporting cash flows from operations, should a decrease in unearned revenue be added to or subtracted from accrual based net income?

A decrease in unearned revenue should be subtracted.

Using the indirect method for reporting cash flows from operations, should an increase in accounts payable be added to or subtracted from accrual based net income?

An increase in accounts payable should be added.

Using the indirect method for reporting cash flows from operations, should an increase in accounts receivable be added to or subtracted from accrual based net income?

An increase in accounts receivable should be subtracted.

When is a Statement of Cash Flows required?

For all business enterprises that report both financial position (Balance Sheet) and results of operations (Income Statement) for a period.

What is the cash flow category for loans made to other entities?

Investing cash flows

What is the cash flow category for purchases of securities available for sale?

Investing cash flows

Where is the cash effect on foreign currency translation reported?

It is reported as a separate part of the reconciliation of the change in cash and cash equivalents during the period.

What is the cash flow category for purchases of trading securities?

Operating cash flows

What is the indirect method on the statement of cash flows?

Reconciles net income to cash flows from operating activities.

What is the basic purpose of the statement of cash flows?

The basic purpose is to provide information about the cash receipts and cash payments for an entity to help investors, creditors, and others.

What is the purpose of the operating section of the statement of cash flows under the indirect method?

The purpose is to adjust accrual net income to net cash flow from operating activities.

What is the purpose of the operating section of the statement of cash flows under the direct method?

The purpose is to show all cash inflows and outflows for operating activities.

What is the reporting basis of the statement of cash flows?

The reporting basis is cash and cash equivalents.

Where are non-cash investing and financing activities reported?

They are reported on the face of the Statement of Cash Flows or as a separate disclosure.

What is the direct method on the statement of cash flows?

This method presents actual inflows and outflows from cash operations. Must also disclose the indirect method (reconciliation of net income to cash flows from operations) as a supporting schedule.