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It is a formal statement that classifies cash receipts (inflows) and cash payments (outflows) into operating, investing and financing activities. This statement shows the net increase or decrease in cash during the period and the cash balance at the end of the period; it also helps project the future net cash flows of the entity.
that enables users to evaluate the changes in net assets of an entity, its financial structure (including its liquidity and solvency) and its ability to affect the amounts and timing of cash flows in order to adapt to changing circumstances and opportunities
ability of the entity to generate cash and cash equivalents and enables users to develop models to assess and compare the present value of the future cash flows of different entities
Par. 4 PAS 7
comparability of the reporting of operating performances by different entities because it eliminates the effects of using different accounting treatments for the same transactions and events indicator of the amount, timing and certainty of future cash flows
assessments of future cash flows and in examining the relationship between profitability and net cash flow and the impact of changing prices
Equity securities cannot qualify as cash equivalents because shares of stocks do not have a maturity date
Preferred shares with specific redemption date and acquired three months before the redemption can qualify as cash equivalents
Par. 19 PAS 7
c. Cash receipts from issuing debentures, loans, notes, bonds, mortgages, and other short or long term borrowings
d. Cash repayments of amounts borrowed; and e. Cash payments by a lessee for the reduction of the outstanding liability relating to a finance lease.
Entities are encouraged to report cash flows from operating activities using the direct method. The direct method provides information which may be useful in estimating future cash flows and which is not available under the indirect method.
Par. 19 PAS 7
Par. 31 PAS 7
Par 31 PAS 7
Par. 39 PAS 7
Kyle Richard Company Statement of Cash Flow For the Year Ended December 31, 2009 Cash Flow from Operating Activities: Cash received from customers Cash paid for operating expenses Cash paid for interest on bank loan Cash Flow from Investing Activities: Acquisition of Equipment Sale of Furniture Cash Flow from Financing Activities: Additional investment by the owner Cash withdrawal by owner for personal use Bank loan Payment of principal of bank loan Increase in Cash Balance Add: Cash balance at the beginning of the Period Cash Balance at the end of the Period DIRECT METHOD 250,000 (120,000) ( 1,500)
128,500
Carlo Buendia Service Company Statement of Cash Flow For the Year Ended December 31, 2008 Cash Flow from Operating Activities: Cash received from customers Cash paid for operating expenses Interest on investments Interest on bank loan Net Cash Flows from Operating Activities Cash Flow from Investing Activities: Purchase of Equipment Sale of Furniture & Fixtures Cash Flow from Financing Activities: Proceeds from bank loan Payment for principal of bank loan Additional Investment from Carlo Buendia Withdrawal of Carlo Buendia Increase in Cash Balance Add: Cash balance at the beginning of the Period Cash Balance at the end of the Period DIRECT METHOD 120,000 ( 60,000) 7,000 ( 2,000) 65,000 ( 40,000) 25,000 ( 15,000) 100,000 ( 5,000) 80,000 ( 10,000)
Miguel Miranda Plumbing Services Statement of Cash Flow For the Year Ended December 31, 2009 Cash Flow from Operating Activities: Cash received from customers Cash received from notes receivable principal Salaries of employees Interest on notes payable Interest on notes receivable Cash Flow from Investing Activities: Purchase of Delivery Van Purchase of Furniture Sale of Equipment Cash Flow from Financing Activities: Proceeds from bank loan Payment for principal of bank loan Withdrawal of Miguel Miranda Increase in Cash Balance Add: Cash balance at the beginning of the Period Cash Balance at the end of the Period DIRECT METHOD 380,000 50,000 ( 90,000) ( 5,000) 6,000 341,000 (160,000) ( 35,000) 30,000 (165,000) 100,000 ( 25,000) ( 20,000)