Statement of Cash Flows Questions And Answers 2022/2023

Statement of Cash Flows - Answer - Shows the changes in cash for the same period of time as that covered by the income statement. The cash flow statement shows all sources of cash and all of the uses of cash. Provides information about cash receipts (inflows) and cash payments (outflows). How does the statement of cash flows differ from the other major financial statements? - Answer - The other financial statements are based on accrual accounting (the realization principle and the matching concept) whereas the cash flow statement simply shows all of the increases and decreases in cash. Operating Activities - Answer - 1. Section of the statement of cash flows includes the cash inflows and outflows related to the normal course of business operations. (The cash effect of transactions that create revenues and expenses and thus enter into the determination of net income). 2. Involve Income Statement Items Investing Activities - Answer - Section of the statement of cash flows includes the cash inflows and outflows related to the purchase and sale of long-term assets and investments. Financing Activities - Answer - 1. Section of the statement of cash flows represents cash that is either paid to or received from owners and creditors. 2. Involve all interest-bearing liabilities, (both current and long-term) and stockholders' equity items The cash flow statement reports - Answer - Cash receipts and cash payments from operating, financing, and investing activities. The cash flow statement helps users assess - Answer - 1. Ability to generate future cash flows. 2. Ability to pay dividends and meet obligations. 3. Why net income is different from operating cash flows. 4. Cash investing and financing transactions. If the income statement reports sales revenue of $1 million, does that mean the company collected $1 million dollars from customers? - Answer - No. Sales could have been made on account. Which income statement item does not have a cash effect? - Answer - Depreciation (called a non-cash expense). Operating Cash Inflows - Answer - 1. From sale of goods or services 2. From return on loans (interest receiv