STATEMENT OF CASH FLOWS (IAS 7) – CLASSIFYING

- A Statement of cash flows analyses (split) into:

 Operating activities;
 Investment activities; and
 Financing activities.

1. Operating activities:
- Under operating activities we include:
• The operating income and expenses (Thus, the Statement of profit or loss and other
comprehensive income);
• AND the following CHANGES IN WORKING CAPITAL:
 (Increase) / Decrease in inventory
 (Increase) / Decrease in prepaid expenses These changes are calculated
 Increase / (Decrease) in creditors from the Statement of Financial
 Increase / (Decrease) in accrued expenses Position (SOFP)

VERY IMPORTANT NB!!! The above words in brackets “()” indicate it is an OUTFLOW of
funds. The words WITHOUT the brackets indicate that it is an INFLOW of funds.

2. Investing activities:
- Under investing activities we include:
• Purchase of assets (Example: Land, buildings, equipment, vehicles etc.)
• Proceeds from the sale of assets (Example: Land, buildings, equipment, vehicles etc.)
• (Increase) / Decrease in investments (Example: 10% Fixed deposit at ABBA Bank)

VERY IMPORTANT NB!!! The above words in brackets “()” indicate it is an OUTFLOW of
funds. The words WITHOUT the brackets indicate that it is an INFLOW of funds.

3. Financing activities:
- Under financing activities we include:
• Proceeds from issue of shares
• Redemption (buy-back) of shares
• Increase / (Decrease) in long-term loans

VERY IMPORTANT NB!!! The above words in brackets “()” indicate it is an OUTFLOW of
funds. The words WITHOUT the brackets indicate that it is an INFLOW of funds.