Chapter 17 The Statement of Cash Flows

What is Cash Flows from Financing Activities? The cash flows from financing activities is the section of the statement or cash flows that reports cash flows from transactions affecting the equity (sale and purchase of shares and payment of dividends) and debt (bonds) of the businesses. What is Cash Flows from Investing Activities? The cash flows from investing activities is the section of the statement or cash flows that reports cash flows from transactions affecting non-current assets; the most common transactions include purchase and disposal of investments and plant, property, and equipment; and lending money and collecting the loans. What is Cash Flows from Operating Activities? The cash flows from operating activities is the section of the statement or cash flows that reports the cash transactions affecting the determination of net income; it includes all the accounts for current assets and current liabilities. What is a Direct Method? The direct method is a method of reporting the cash flows from operating activities by adjusting each item in the income statement from the accrual basis to the cash basis. What is Free Cash Flow? The free cash flow is the amount of cash provided by operating activities adjusted for capital expenditures and dividends paid. What is an Indirect Method? The indirect method is a method of reporting the cash flows from operating activities by assuming that the net income figure is all cash and then adding and subtracting deferrals and accruals. In addition depreciation and losses must be added to net income, and gains subtracted. What is Statement of Cash Flows? The statement of cash flows is a financial statement that measures the liquidity of a company. It accounts for all the inflows and outflows of cash during a specific period of time. What is Cash? Cash is the ledger in the General Ledger that accounts for all the cash received and paid during a specified period of time. Cash is an accounting term and should not be confused with ‘money.’ Cash includes coins, currency, money orders, travelers checks, and other near money items. Why is the Statement of Cash Flows so scrutinized by analysts? It is carefully scrutinized because in the last decade many corporations have falsified their Income Statements and Balance Sheets. The Cash Flows statement is more difficult to tamper with since it has to tie into the bank accounts. Ch1 Accounting in Action Ch2 Recording Process Ch3 Adjusting the Accounts Ch4 Completing the Accounting Cycle Ch5 Merchandising Operations Ch6 Inventories Ch7 Accounting Information Systems Ch8 Internal Control and Cash Ch9 Accounting for Receivables Ch10 PP&E, Natural Resources, and Intangible Assets Ch11 Current Liabilities and Payroll Ch12 Partnerships Ch13 Corporations Ch14 Corporations:Dividends, RE Ch15 Long Term Liabilities Ch16 Investment Ch17 Statement of Cash Flows Ch18 Financial Statement Analysis Plato and Accounting Price/Earnings Ratio Plant Assets Luca Pacioli and DaVinci The secrets of 'no-doze' prose: Mary Duffy's Sentence Openers

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