07 ch 12 - Chapter Twelve Statement of Cash Flows (Pages...

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Chapter Twelve – Statement of Cash Flows (Pages 584-611) I. Definition: Reports the cash receipts, cash payments, and net change in cash resulting from operating, investing, and financing activities during a period. a. Should help assess: i. The entity’s ability to generate future cash flows ii. The entity’s ability to pay dividends and meet obligations iii. The reasons for the difference between net income and net cash provided (used) by operating activities, which will help to assess the reliability of net income iv. The cash invested and financing transactions during the period b. Three main sections i. Operating activities 1. Include the cash effects of transactions that create revenues and expenses 2. Most important 3. Involve income statement items 4. Typical cash inflows a. Sale of goods or services b. Interest received c. Dividends received 5. Typical cash outflows a. To suppliers for inventory b. To employees for services c. To government for taxes d. To lenders for interest e. To others for expenses ii. Investing activities 1. Include (a) acquiring and disposing of investments and property, plant, and equipment, and (b) lending money and collecting the loans 2. Involve cash flows from changes in investments and long-term asset items 3. Typical cash inflows a. Sale of property, plant, and equipment b. Sale of investments in debt or equity securities of other entities c. Collection of principal on loans to other entities
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This note was uploaded on 10/09/2011 for the course ACCOUNTING 100 taught by Professor 1 during the Spring '11 term at Wisconsin.

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07 ch 12 - Chapter Twelve Statement of Cash Flows (Pages...

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