Cash Flow Statement-2015 - Cash Flow Statement DEPARTMENT...

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Cash Flow Statement DEPARTMENT OF ACCOUNTING FACULTY OF BUSINESS ADMINISTRATION AIUB
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Cash flow Statement (IAS-7) CASH FLOW STATEMENT Table of Contents: Page Numbe r 7.1 Introduction: 3 7.2 Definition of Cash flow Statement 3 7.3 Purpose of statement of Cash Flow 3 7.4 Classification of cash flows 3 7.5 Types of Cash Inflows & Cash Outflows 7.6 General guidelines of CFS 7.7. Significant Non- cash Activities 7.9. Preparing a Statement of Cash flow 7.10 Format of the Statement of Cash Flows 7.11. Adjustments within the operating activities sections 7.12. Free Cash Flow 7.13. How to Write a Cash Flow Statement 8 9 10 11 12 12 13 14 Illustration 15 Illustration – 1 Juarez Company 15 Illustration – 2: John Kolinsky Manufacturing Company Exercise: 16 16-34 7.1. Introduction The official name for the cash flow statement is the statement of cash flows. The statement of cash flows is one of the main financial statements. (The other financial statements are the balance sheet, income statement, and statement of stockholders' equity.) The cash flow statement reports the cash generated and used during the time interval specified in its heading. The period of time that the statement covers is chosen by the company. For example, the heading may state "For the Three Months Ended December 31, 2011" or "The Fiscal Year Ended September 30, 2011". Investors and creditors analyze the prospects of receiving a cash return from their dealings with a firm. (a) Cash flows to investors and creditors depend on the corporation generating cash flows to it. (b) Decision makers rely heavily on the information reported in periodic financial statements to project a company’s cash generating ability (c) Some important questions are not easily answered from the information the balance sheet and income statement provide. I. The statement of cash flows fills an information gap left by the balance sheet and the income statement. Here’s a summary of SFAS 95 "Statement of Cash Flows." A. It presents information about cash flows that the other statements either (a) do not provide or (b) provide only indirectly. B. Cash continuously flows into and out of an active business. C. The concept of the statement is quite simple: It provides a list of the cash inflows and outflows that occurred during the reporting period. Before seeing how the statement of cash flows is prepared from the information typically Page 2 of 47
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Cash flow Statement (IAS-7) available for this purpose, the basic structure and composition of the statement is overviewed here. II. Cash includes "cash equivalents." The statement of cash flows does not differentiate between amounts held as cash and amounts held in cash equivalent investments. (a) These are short-term, highly liquid investments that can readily be converted to cash with little risk of loss. (b) Examples are money market funds, treasury bills, and commercial paper. (c) These investments must have a maturity date not longer than three months from the date of purchase. Companies establish a policy regarding which
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  • Fall '11
  • Adnan
  • Balance Sheet, Generally Accepted Accounting Principles

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