Week67 Cash Flow_3 slides per pagepdf

Week67 Cash Flow_3 slides per pagepdf - ACCT1002 Accounting...

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1 1 ACCT1002 Accounting 1B Semester 2, 2009 Lecturer: Dr Cornelia Beck Unit Coordinator – Paul Blayney Adapted PowerPoint presentation by Sandra van der Laan, University of Sydney 2 Learning Objectives Indicate the main purpose of the Statement of Cash Flows. Distinguish among operating, investing and financing activities. Prepare a Statement of Cash Flows using the direct method for operating cash flows. Prepare a reconciliation of profit to net cash provided by operating activities ( indirect method) Use the Statement of Cash Flows to evaluate an entity. Explain the impact of the product life cycle on an entity’s cash flows. 3 1.1 Purpose of Statement of Cash Flows To provide information about: cash receipts cash payments net change in cash resulting from operating, investing and financing activities To the beginning and ending cash balances.
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2 4 1.2 Use of the Statement of Cash Flows Cash-flow information helps investors, creditors and other interested parties assess: the ability of an entity to generate positive cash flows from operating activities generate positive net cash flows in the future to assess solvency fund changes in the size or nature of activities (eg: fund a new factory) obtain external finance (eg: obtain a loan) the over a period 5 2. Classification of Cash Flows Cash receipts from customers Cash expenses Interest paid Taxes paid Cash payments to suppliers Other cash revenues Proceeds from sale of investments Payments for purchase of investments Dividends paid to shareholders Repayment of debt principal Proceeds from issuing shares and debt 6 2. Classification of Cash Flows con’d. Operating activities Entity’s principal revenue-generating activities, and activities not regarded as investing or financing activities. Investing activities Acquisition and disposal of long-term assets. Financing activities Affect the size and composition of contributed equity and borrowing.
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3 7 Significant Non-Cash Activities Significant financing and investing activities that do not affect cash are not reported in the body of the Statement of Cash Flows, but are . These include: Conversion of debt into ordinary shares 8 3. Format of Statement of Cash Flows Operating activities are reported using two methods: . The presents: Cash receipts - cash payments = net cash provided/used by operating activities. AASB 107 requires the direct method for published financial statements. adjusts net profit after tax for • Timing differences • Non-cash items • Any investing or financing items included in profit to determine net cash provided/used by operating activities . The indirect method converts information
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This note was uploaded on 04/14/2010 for the course ACCT 1002 taught by Professor Angela during the Three '10 term at University of Sydney.

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Week67 Cash Flow_3 slides per pagepdf - ACCT1002 Accounting...

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