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 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.
- A. Cash Receipts: It encompasses all the cash receipts from sale of goods, and on account receivable.
- B. 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.
- Deduct the amount of cash used to purchase any fixed assets.
- Add the amount of cash received from sale of any fixed asset.
Cash flow from financing activities: This section of cash flows statement provides information about the
- Add the amount of cash received from any sources of finance.
- Deduct the amount of cash used for payment for dividend and interest from financing activities.
- Deduct the amount of cash used for payment of
treasury stock from financing activities.
To Prepare: Statement of cash flows of W Company using Direct method.
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Financial Accounting: Tools for Business Decision Making, 8th Edition
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