Chapter 12: Statement of Cash Flows

A set of flashcards covering key concepts related to the Statement of Cash Flows, focusing on various activities such as operating, investing, and financing.

Statement of Cash Flows

A financial statement that summarizes the amount of cash and cash equivalents entering and leaving a company.

Operating Activities

Cash inflows and outflows that directly relate to revenues and expenses reported on the income statement.

Investing Activities

Cash inflows from the sale of equipment or securities and outflows for purchasing equipment or investments.

Financing Activities

Cash inflows from borrowing and issuing stock, and outflows for repaying loans and paying dividends.

Direct Method

A way of reporting cash flows from operating activities that involves detailing cash inflows and outflows.

Indirect Method

A method that starts with net income and adjusts for changes in balance sheet items to determine cash flows from operating activities.

Net Change in Cash

The difference between cash inflows and outflows during a specific period.

Positive Cash Flow

When cash inflows exceed cash outflows, indicating a profitable operation.

Negative Cash Flow

When cash outflows exceed cash inflows, which can signal financial issues.

Accrual Basis

An accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when cash transactions occur.

Cash Equivalents

Short-term, highly liquid investments that are easily convertible to known amounts of cash.