CFAS PASS 7 - 8

Statement of Cash Flows

shows the inflow and outflow of cash in a business during a period

Operating Activities

cash flows from daily business operations

Investing Activities

cash flows from buying and selling long-term assets

Financing Activities

cash flows related to loans and owner’s equity

Cash Inflow

cash received by the business

Cash Outflow

cash paid by the business

Interest Paid

cash outflow usually classified as operating or financing

Interest Received

cash inflow classified as operating or investing

Dividends Received

cash inflow classified as investing

Dividends Paid

cash outflow classified as financing

Income Taxes Paid

usually classified as operating cash outflow

Direct Method

shows actual cash receipts and cash payments

Indirect Method

starts with net income and adjusts to get cash flow

Non-cash Transactions

transactions without cash but still disclosed

Accounting Policies

specific principles or methods used in preparing financial statements

Change in Accounting Policy

switching from one accounting method to another

Retrospective Application

applying changes to past financial statements

Accounting Estimates

approximations or judgments used in accounting

Change in Accounting Estimate

revision of an estimate due to new information

Prospective Application

applying changes only to current and future periods

Errors

mistakes or omissions in financial statements

Prior Period Errors

errors that occurred in previous periods

Retrospective Correction

correcting errors by adjusting past records

Consistency

using the same accounting methods over time

Reliability

information is accurate and trustworthy

Comparability

ability to compare financial statements across periods