AFM101 Chapter Notes - Chapter 5: Money Market Fund, Cash Flow, Current Liability

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM101
• Professor: Donna Psutka

Document Summary

Less than 3 months (from date of acquisitions) to their maturity and subject to an insignificant risk of changes in value. Examples are : treasury bills, money market funds, and commercial paper ( short-term notes payable issued by large corporations). Direct method where the operating activities are presented as gross receipts and gross payments. Purchase of goods for resale and services ( electricity, etc) Not followed by companies because - expensive to implement than the indirect method. Consists of cash flows from operating, investing and financing activities. Dynamics of change in cash and non-cash assets. We cannot prepare cash flows by using amounts recorded in the specific accounts because these amounts are used on accrual accounting. Instead amounts are adjusted to cash basis by creating balance sheet and earnings statement. Cash = liabilities + se - non-cash assets. So, generally, increase in cash is accompanied by decrease in on-cash liabilities, increase in se and liabilities.