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Statement of Cash Flows in Accounting Flashcards

Statement of Cash Flows in Accounting Flashcards
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Cash Flow Statements
These track how money moves in a company. They can be prepared in two ways and have three sections: financial and investment, which are the same for both preparation methods, and operations.
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Indirect Method for Preparing Cash Flow Statements: Sources
This method of cash flow statement preparation uses information about income statements and balance sheets. Because this information is easy to find a lot of companies use this method.
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Preparing Cash Flow Statements: Indirect Method
A method of preparing cash flow statements that is used by many large businesses because it offers an increased focus on depreciation and amortization.
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Preparing Cash Flow Statements: Direct Method
Small businesses and accounting companies tend to prefer this method to prepare cash flow statements because it provides a good look at how cash travels in a company.
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Non-Cash Investing and Financing Activities: Reporting
You can report these activities by including them as a footnote on a statement of cash flows.
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Non-Cash Investing and Financing Activities
An activity that involves purchasing something for a business without using cash. This might involve using a credit card or a note payable.
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Reasons why companies might use cash in their investing activities
Companies might use cash for these activities if they recently purchased long-term assets.
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Reasons why companies might use cash in their operating activities

They recently paid a large amount to employees or suppliers

They bought a lot of inventory

They aren't efficient in collecting money from customers

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16 cards in set

Flashcard Content Overview

This set of flashcards can serve as a useful study tool for reviewing the statement of cash flow. You can go over the direct and indirect methods for preparing this statement as well as the six steps you must follow when working on this document. Ways that companies can use cash in operating activities will also be addressed by this set.

Front
Back
Reasons why companies might use cash in their operating activities

They recently paid a large amount to employees or suppliers

They bought a lot of inventory

They aren't efficient in collecting money from customers

Reasons why companies might use cash in their investing activities
Companies might use cash for these activities if they recently purchased long-term assets.
Non-Cash Investing and Financing Activities
An activity that involves purchasing something for a business without using cash. This might involve using a credit card or a note payable.
Non-Cash Investing and Financing Activities: Reporting
You can report these activities by including them as a footnote on a statement of cash flows.
Preparing Cash Flow Statements: Direct Method
Small businesses and accounting companies tend to prefer this method to prepare cash flow statements because it provides a good look at how cash travels in a company.
Preparing Cash Flow Statements: Indirect Method
A method of preparing cash flow statements that is used by many large businesses because it offers an increased focus on depreciation and amortization.
Indirect Method for Preparing Cash Flow Statements: Sources
This method of cash flow statement preparation uses information about income statements and balance sheets. Because this information is easy to find a lot of companies use this method.
Cash Flow Statements
These track how money moves in a company. They can be prepared in two ways and have three sections: financial and investment, which are the same for both preparation methods, and operations.
Direct Method for Preparing Cash Flow Statements: Sources
You need a lot of sources when preparing cash flow statements with this method. You may need cash receipts, the payroll journal and the cash disbursements journal.
Process for Preparing a Cash Flow Statement: Step 1
You begin this process by finding the new cash balance for a company.
Process for Preparing a Cash Flow Statement: Step 2
At this step in preparing a cash flow statement, you work on calculating a business's operating activities, which include any action a company takes as a normal part of their business.
Process for Preparing a Cash Flow Statement: Step 3
You look at a business's investing activities at this stage of cash flow statement preparation. You might record outflows in this area if a business purchases equipment or land.
Process for Preparing a Cash Flow Statement: Step 4
The financing activities of a business are calculated at this step of cash flow statement preparation. You may record an inflow at this step if a company sold stocks.
Process for Preparing a Cash Flow Statement: Step 5
Once you reach this step of the process for preparing a statement of cash flow you will need to calculate the business's net cash.
Process for Preparing a Cash Flow Statement: Step 6
This represents the last step in setting up a cash flow statement. You complete it by notating a company's disclosures.
How businesses can use excess cash
Businesses may choose to use these funds to invest back in their business. This can lead to greater amounts of profit for the business.

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