{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

summary-lectures-5-8.pdf - lOMoARcPSD Summary lectures 5-8...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Summary - lectures 5-8 Accounting for Decision Making (James Cook University) Distributing prohibited | Downloaded by Ta Tran ([email protected]) lOMoARcPSD
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
BU1002 EXAM REVISION TEST TWO WEEK FIVE STATEMENT OF CASH FLOWS Statement of Cash Flows: Reports on an entity’s cash inflows and outflows for a specific period; prepared on cash basis accounting. Concerned with the timing of cash receipts and payments, not the timing of the underlying transaction. Cash basis shows how much cash is actually at hand. Net cash flows = inflows outflows Gives additional information to assess the entity’s ability to: 1. Generate cash flows 2. Meet financial commitments when they are due 3. Fund changes in scope/natures of activities 4. Obtain external finance Three sections reflecting the major cash flow operations: 1. Operating activities generate cash, meet short term obligations (current assets + liabilities) 2. Investing activities how assets are purchased and financed (non-current assets) 3. Financing activities where finance comes from; borrowing (non-current liabilities) The AASB requires direct method be used in preparing statement of cash flows and reconciliation of cash flows from operating activities to profit/loss (discloses major classes of gross cash receipts + gross cash payments) Profit is to be reconciled to net cash provided/used by operations must be disclosed in notes to the account allows users to see changes in operating accounts brought about by use of accrual vs. cash basis accounting Cash Flows Statements contains: Net cash flows from operating, investing and financing activities, total net cash flows, beginning and ending cash balance and comparative figures (e.g. two to three years of data) Information is usually recorded using accrual accounting; therefore, for statement of cash flows (cash basis), conversion is required: Direct method discloses major classes of gross cash receipts + payments Indirect method adjusts profit/loss for effects of transactions of non-cash nature and deferrals/accruals of operating revenue and expenses IFRS + AAS give the choice of which to use but Australian entities are encouraged to use the direct method. To reconcile profit and loss and operating activities cash flows: Increase in current assets means a reduction in cash Decrease in current assets mean increase in cash Increase in current liabilities means increase in cash
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}