Concept explainers
Statement of
Statement of cash flow is a financial statement that shows the cash and cash equivalents of a company for a particular period of time. It shows the net changes in cash, by reporting the sources and uses of cash as a result of operating, investing, and financing activities of a company.
Cash flows from operating activities:
These refer to the cash received or cash paid in day-to-day operating activities of a company.
Direct method: This method uses the basis of cash for preparing the cash flows of statement.
Cash flows from operating activities: In this direct method, cash flow from operating activities is computed by using all cash receipts and cash payments during the year.
- Cash Receipts: It encompasses all the cash receipts from sale of goods and on account receivable.
- Cash Payments: It encompasses all the cash payments that are made to suppliers of goods and all expenses that are paid.
Cash flow from investing activities:
This section of cash flows statement provides information concerning about the purchase and sale of capital assets by the company.
Cash flow from financing activities:
This section of cash flows statement provides information about the
To prepare: The cash flow statement of Incorporation A for the year ended December 31, 2018 using direct method.
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- Under IAS7 operating cash flows can be shown using either the Direct Method or Indirect Method. Distinguish between the Direct Method and the Indirect Method indicating the advantages and disadvantages of both methods. What are the main headings under which Cash Flow Statements are presented according to IAS 7.arrow_forwardExplain the purpose of SFAC No. 7: “Using Cash Flow Information and Present Valuein Accounting Measurements.arrow_forwardanswers are given. Only need solutions What is the net cash provided by operating activities? a) P90,000b) P108,000c) P153,000-answerd) P75,000 51. Using the data in no. 50, what is the net cash provided (used) by investingactivities?a) (P108,000)-answerb) P90,000c) P18,000d) (P132,000) 52.Using the data in no. 50, what is the net cash provided (used) by financing activities?a) (P162,000)-answerb) P72,000c) (P90,000)d) P18,000arrow_forward
- Indicate for each of the following what should be disclosed on a statement of cash flows (indirect method). If not disclosed, select "Not shown." There may be more than one answer for some items. For an item that is added to net income, select "Add," and for an item that is deducted from net income, select "Deduct." Show financing and investing outflows in parentheses. For example, an answer might be: Deduct $4,700 or Investing ($31,000). If the item is a noncash transaction that should be disclosed separately, select "Noncash $40,000."arrow_forward1. Novak Corporation is preparing its 2020 statement of cash flows, using the indirect method. Presented below is a list of items that may affect the statement. Using the code below, indicate how each item will affect Novak’s 2020 statement of cash flows. Code Letter Effect A Added to net income in the operating section D Deducted from net income in the operating section R-I Cash receipt in investing section P-I Cash payment in investing section R-F Cash receipt in financing section P-F Cash payment in financing section N Noncash investing and financing activity (a) Purchase of land and building. select a code letter (b) Decrease in accounts receivable. select a code letter (c) Issuance of stock. select a code letter…arrow_forward****New ans pls In what way is the preparation of the Operating Activities section of the Cash Flow statement prepared differently using the direct method as compared with the indirect method? Why does the FASB prefer the direct method over the indirect method?arrow_forward
- Only for d and e, subpart, a, b, and c has been answered here: https://www.bartleby.com/questions-and-answers/assume-a-rm300000-investment-and-the-following-cash-flows-for-two-products-year-product-x-product-y-/451dabc9-fd11-47c3-b65c-12ff5b7e32e5arrow_forwardThe cash flow statement shows how much money is generated by an entity's operating activities, which are its main objects..." (A. Thomas and A.M. Ward, 2019 pp576) You must explain why net cash from operations differs from net profit, as well as the impact that working capital management has on cash flow. Develop your response by delving more into the wide variety of challenges and factors involved in managing one type of working capital, such as inventory, trade receivables, or trade payables. Asaparrow_forward1. Your answer is partially correct. Novak Corporation is preparing its 2020 statement of cash flows, using the indirect method. Presented below is a list of items that may affect the statement. Using the code below, indicate how each item will affect Novak’s 2020 statement of cash flows. Code Letter Effect A Added to net income in the operating section D Deducted from net income in the operating section R-I Cash receipt in investing section P-I Cash payment in investing section R-F Cash receipt in financing section P-F Cash payment in financing section N Noncash investing and financing activity (a) Purchase of land and building. select a code letter (b) Decrease in accounts receivable. select a code letter (c) Issuance of stock. select a code letter…arrow_forward
- The major difference between the way a statement of cash flows is prepared using theindirect method and the way the same statement is prepared using the direct method ishow ___________________are reported.a. operating activitiesb. investing activitiesc. financing activitiesd. noncash activitiesarrow_forwardMatch the individual transactions listed below with their statement of cash flows classification, using the following code: Cash inflow from operating activitiesCash outflow from operating activitiesCash inflow from investing activitiesCash outflow from investing activitiesCash inflow from financing activitiesCash outflow from financing activitiesNone of the above Payments for merchandisePayments for interestPayments for dividendsPayments for plant and equipmentPayments for bond payable retirementsPayments for marketable securitiesPayments for employeesPayments to governmentsIssuing a stock dividendCash from customersCash from issuing common shareCash from dividendsCash from sale of old buildingCash from interestarrow_forwardUse the following information from Isthmus Companys financial statements to prepare the operating activities section of the statement of cash flows (indirect method) for the year 2018.arrow_forward
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax CollegeCentury 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage