STATEMENT OF CASH FLOWS An entity provided the following increases (decreases) in the statement of financial position accounts. Cash and cash equivalents 120,000 Available for sale securities 300,000 Accounts receivable, net - Inventory 80,000 Long-term investments (100,000) Plant assets 700,000 Accumulated depreciation - Accounts payable ( 5,000) Dividend payable 160,000 Short-term bank debt 325,000 Long-term debt 110,000 Share capital, P10 par 100,000 Share premium 120,000 Retained earnings 290,000 Net income for the current year was P790,000. Cash dividend of P500,000 was declared. Building costing P600,000 and with carrying amount of P350,000 was sold for P350,000. Equipment costing P110,000 was acquired through issuance of long-term debt. A long-term investment was sold for P135,000. There were no other transactions affecting long-term investment. The shares were issued for cash. 1. What is the net cash provided by operating activities? 2. What is the net cash used in investing activities? 3. What is the net cash provided by financing activities?
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
STATEMENT OF CASH FLOWS
- An entity provided the following increases (decreases) in the
statement of financial position accounts.
|
Cash and cash equivalents |
120,000 |
|
|
Available for sale securities |
300,000 |
|
|
|
- |
|
|
Inventory |
80,000 |
|
|
Long-term investments |
(100,000) |
|
|
Plant assets |
700,000 |
|
|
Accumulated |
- |
|
|
Accounts payable |
( 5,000) |
|
|
Dividend payable |
160,000 |
|
|
Short-term bank debt |
325,000 |
|
|
Long-term debt |
110,000 |
|
|
Share capital, P10 par |
100,000 |
|
|
Share premium |
120,000 |
|
|
|
290,000 |
|
- Net income for the current year was P790,000.
- Cash dividend of P500,000 was declared.
- Building costing P600,000 and with carrying amount of P350,000 was sold for P350,000.
- Equipment costing P110,000 was acquired through issuance of long-term debt.
- A long-term investment was sold for P135,000. There were no other transactions affecting long-term investment.
- The shares were issued for cash.
1. What is the net cash provided by operating activities?
2. What is the net cash used in investing activities?
3. What is the net cash provided by financing activities?
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