Lecture 12: Cash Flow Statements

A set of flashcards focusing on key concepts related to cash flow statements as discussed in Lecture 12.

What is the purpose of a statement of cash flows?

To provide information about the historical changes in cash and cash equivalents of an entity.

What does AASB 107 require in cash flow statements?

The classification of cash flows from operating, investing, and financing activities.

Define 'cash' in the context of cash flow statements.

Cash includes on-hand notes and coins as well as demand deposits.

What are cash equivalents?

Short-term, highly liquid investments that are easily convertible to cash with minimal risk of value changes.

Why might cash flow statements be considered more reliable than profit data?

Cash flow data is more factual and objective compared to profit data which may involve subjective judgments.

What factors affect cash received from customers?

Sales made in the prior year, current year sales not yet collected, settlement discounts, and bad debts written off.

How do you calculate cash payments to suppliers?

Cash payments = Opening Accounts Payable - Closing Accounts Payable + Cost of Sales - Discounts Received.

What are the three classifications of cash flows?

Operating activities, investing activities, financing activities.

What is the direct method for reporting operating cash flows?

It involves disclosing major classes of gross cash receipts and payments directly.

What is the significance of cash flows from operations?

They are considered a superior performance measure useful in assessing liquidity and solvency.