Statement of Cash Flows
- operating , investing, and financing activities
- Cash receipts and cash payments
- How the entity generates cash and uses cash and cash equivalents
Cash: on-hand and demand deposits
Cash Equivalent
- readily convertible; insignificant risk of change in value
- Short maturity f 3 months or less from the date f acquisition
a. BSP Treasury Shares
b. Time Deposits
c. Money market instruments/Commercial paper
d. Preference Shares (Specific Redemption Date)
e. Not: Equity Securities (no maturity date)
Bank Overdrafts - Fluctuates bank balance; included in cash and cash equivalents
Operating Activities
- Principle revenue-producing activities
- Enter into the determination of net income or loss
a. Cash Receipts
i.
Sales of goods and services
ii.
Royalties, rental fees, commissions, and other revenue
b. Cash Payments
i.
Supplier for goods and services
ii.
Selling administrative and other expense
c. Cash Receipts and payments of:
i.
An insurance enterprise for premiums and claims, annuities, and other policy
benefits
ii.
Income taxes (unless said otherwise)
iii.
Securities held for dealing or trading purposes
d. Cash advances and loans made by a financial institution
e. Interest paid and interest received
f. Income taxes
g. Accrued Expenses
h. Dividends received - determination of net income
Investing Activities
- Acquisition and disposal of long-term assets and other investments not included in
cash equivalents
- Nonoperating Assets
- Trading Securities
- Interest received (return on investment)
a. Cash Payments to Acquire and/or Cash Receipts from sales:
i.
Property plant and equipment, intangibles and other long-term assets
ii.
Equity or debt instruments and interest in joint ventures (current and long-term)
iii.
Repayment of advances and loans made to other parties
iv.
For future contract, forward contracts, option contract and swap contract
Financing Activities - equity capital and borrowings; transactions…
a. Equity financing: Between the entity and the owners
b. Debt Financing: Between the entity and the creditors
c. Interest paid (cost of obtaining financing resources)
a. Cash Receipts
i.
From issuing shares or other equity instruments (issuance of ordinary and
preference shares)
ii.
Issuing debentures, loans, notes, bonds, mortgages, and other short or long
term borrowings
b. Cash payments
i.
To owners to acquire or redeem the enterprise’s shares (payment for treasury
stock)
ii.
For amounts borrowed
iii.
By a lessee for the reduction of the outstanding liability relating to a finance
lease
iv.
Dividends paid
c. Operating activities: cash payments to settle obligations as trade accounts and notes
payable, income tax payable, accrued expenses
Noncash Transactions
a. Acquisition of asset either by assuming directly related liability or by means of a finance
lease
b. Acquisition of asset by means of issuing share capital or bonds payable
c. Conversion of debt to equity (bonds payable to share capital)
d. Conversion of preference share to ordinary share
Direct Method
- In detail or itemizes the major classes of gross cash receipts and gross cash payments
- “Cash basis” income statement
- Cash receipts, payments listed one by one (difference represents the net cash flow)
Indirect Method
- Net income/loss is adjusted for the effects of transactions of a noncash nature, any
deferrals or accruals of past of future operating cash receipts and payments and items
of income or expense associated with investing and financing activities
- Negins with the accrual basis net income; convert the income to a cash basis
1. All increases in trade noncash current assets
Set of Financial Statements
a. Statement of Financial Position (Liquitity & Solvency) - stability
i.
Asset
ii.
Liabilty
iii.
Equity
b. Statement of Comprehensive Income
c. Statement of Changes in Equity
d. Statement of Cash Flows
e. Notes to Financial Statement
a. Current - Within one year/operating cycle, whichever is greater
b. Non-current - Not expected to be sold/used up within
Operating Cycle
a. Supermarket - 1 month = 1 year for current
b. Real Estate - 5 years = for current
Money
- Currency and coins in circulation and legal tender
- Standard medium of exchange
Financial Position
1. Cash
a. Face Value
b. Unrestricted in use - readily available
c. payable in money
d. acceptable by the bank for deposit and immediate credit
e. Cash on hand - undeposited cash collections
f. Cash in bank - current/checking/Payroll/savings
g. Cash fund (petty cash for small expenses, payroll, dividend)
h. Checks, bank drafts and money orders
i. Not: post dated checks (unacceptable)
2. Cash Equivalents - Acquired (3) months before maturity
a. BSP Treasury Shares (3-year purchased three months before maturity)
b. Time Deposits - cannot remove before maturity, higher rate than savings
c. Money market instruments/Commercial paper - fraction owner on treasury bills
d. Preference Shares (Specific Redemption Date)
e. Note: Equity Securities (no maturity date)
f. Foreign Currency - current exchange rate
3. Receivables
4. Inventories
5. Prepayments / account payables
Excess Cash
a. Invested in time deposits, money market instruments and treasury bills
b. Cash and cash equivalents - the term is three months or less
c. Short-term financial assets/temporary investments - more than three months
d. Noncurrent/ long-term Investments - over a year
Cash Fund for Certain Purpose
a. Current Operations Payment of Current Obligations
i.
Current asset (Cash & cash equivalents)
b. Non-current purpose payment of non-current obligations
i.
Non-current asset under investments
Systems
a. Periodic
i.
Physical counting of goods at hand
ii.
Quantities x unit costs
b. Perpetrual
i.
Maintenance of records (stock cards)
ii.
Running summary of inflow and outflow