Chapter 13: Statement of Cash Flows

What does Cash compromise of?

Cash on hand and Demand Deposits (ie; money in a bank account that can be withdrawn at any time without notice.)

What are Cash Equivalents?

Short-term, highly liquid investments that are readily convertible into known amounts.

Cash Inflows and Outflows are classified under 3 headings. What are they?

Operating Activities, Investing Activities, Financing Activities

Operating Activities

Primarily derived from the main revenue-producing activities of the entity and any other activities that are not investing or financing activities.

What are the two possible layouts for cash generated from operating activites?

1. Indirect Method (to be used in exams unless told otherwise)

2. Direct Method

Investing Activites

Cash flows derived from the acquisition and disposal of non-current assets and other investments not included in cash equivalents.

Financing Activites

Cash flows derived from activites that result in changes to the equity capital and borrowings of the entity.