21642 Chapter Notes - Chapter 6 & 9: Sunk Costs, Marginal Cost, Decision-Making
13 Jun 2018
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Cash Flows
Cash flow statement:
-Explains the changes in an organisation’s cash amount during a reporting period, and provides a
summary of the sources and uses of cash
-Reconciles cash balance at start of year and end of year
-Classifies receipts and payments as operating, investing, and financing
Sources of cash (receipts):
•Operations - revenue and expenses from operations, interest
•Investing - non-current assets exchange (NCA)
•Financing - borrowings, new share issues (L + OE)
Uses of cash (payments):
•Operations - payments of operating expenses, interest on borrowings, taxes
•Investing - purchase of PPE, purchase of NCA
•Financing - cash dividends, repay borrowings, repurchase of shares
Direct method - summarises inflows and outflows from operations using cash records.
Indirect method - approach problems by using balance sheet at the beginning and end of the
period and the profit and loss statement, examine movements in CA and CL. Considers:
-Depreciation and amortisation
-Increase and decrease of CA and CL
-Gains and losses on disposal of NC
Together these account for net cash flow.
Depreciation is not a cash flow item, only accounted on the cash flow stamens when the asset is
purchased or sold.
•Straight Line Depreciation = Acquisition cost - Residual value / Useful life
(Residual value may be referred to as end value, scrap value, or salvage cost
•Units of Production Depreciation = Acquisition cost - Residual value / Useful units of production
•Reducing Balance Depreciation = Value of an asset x Reducing balance %!
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Explains the changes in an organisation"s cash amount during a reporting period, and provides a summary of the sources and uses of cash. Reconciles cash balance at start of year and end of year. Classi es receipts and payments as operating, investing, and nancing. Sources of cash (receipts): operations - revenue and expenses from operations, interest, investing - non-current assets exchange (nca, financing - borrowings, new share issues (l + oe) Uses of cash (payments): operations - payments of operating expenses, interest on borrowings, taxes, investing - purchase of ppe, purchase of nca, financing - cash dividends, repay borrowings, repurchase of shares. Direct method - summarises in ows and out ows from operations using cash records. Indirect method - approach problems by using balance sheet at the beginning and end of the period and the pro t and loss statement, examine movements in ca and cl. Increase and decrease of ca and cl. Gains and losses on disposal of nc.
