Chapter 21 NEW

Chapter 21 NEW - Statement of Cash Flows Chapter 21...

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Accounting 124 / Cash Flows 1 Statement of Cash Flows Chapter 21 Prepared by: Prof. Elizabeth Venuti
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Accounting 124 / Cash Flows 2 Income Statement vs. Statement of Cash Flows Similarities Measure performance. Cover identical reporting periods. Distinguish between operating and non- operating transactions. Differences Income statement is accrual based. Statement of cash flows is cash based.
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Accounting 124 / Cash Flows 3 Purpose of the Statement of Cash Flows To provide information about: The cash receipts and disbursements Of an entity For a period of time (same period as income statement) Summarized by function: Operating Investing Financing
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Accounting 124 / Cash Flows 4 Uses of the Statement of Cash Flows To help investors, creditors and other financial statement users to evaluate: Entity’s ability to generate future cash flows. Entity’s ability to pay dividends and meet maturing obligations. Reasons for the difference between net income and net cash flows from operating activities. Cash and non-cash investing and financing transactions.
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Accounting 124 / Cash Flows 5 Classification and Format Operating activities Cash transactions related to the determination of net income. Investing activities Cash transactions related to long-term assets. Financing activities Cash transactions related to long-term liabilities and shareholders’ equity Non-cash investing and financing activities Significant non-cash transactions affecting long-term assets, long-term liabilities and/or shareholders’ equity.
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Chapter 21 NEW - Statement of Cash Flows Chapter 21...

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