Financial Accounting Canadian Edition (13)
合集下载
- 1、下载文档前请自行甄别文档内容的完整性，平台不提供额外的编辑、内容补充、找答案等附加服务。
- 2、"仅部分预览"的文档,不可在线预览部分如存在完整性等问题,可反馈申请退款(可完整预览的文档不适用该条件!)。
- 3、如文档侵犯您的权益，请联系客服反馈,我们会尽快为您处理(人工客服工作时间：9:00-18:30)。
– Both methods arrive at the same amount of net cash provided (used) by operating activities
• Most companies favour the indirect method for the following reasons
• Cash effects of transactions that create revenues and expenses that enter into determination of profit • Includes relevant noncash current assets and current liabilities on the statement of financial position
– Issue of debt to purchase assets – Issue of shares to purchase assets – Conversion of debt into equity – Exchange of property, plant, and equipment
Discussion Question
Format of Cash Fling the Statement of Cash Flows
• • • • Step 1: Prepare operating activities section Step 2: Prepare investing activities section Step 3: Prepare financing activities section Step 4: Complete the statement of cash flows
– Where the related account is an income statement account
Investing Activities
• Purchasing and disposing of:
– Long-term investments not held for trading – Long-lived assets
Step 1: Operating Activities
• Determine the net cash provided (used) by operating activities by converting profit from an accrual basis to a cash basis • Conversion may be done by either the indirect method or the direct method
+ Noncash expenses such as depreciation and losses – Noncash revenues and gains + Decreases in noncash current asset accounts and increases in noncash current liability accounts – Increases in noncash current asset accounts and decreases in noncash current liability accounts
Discussion Question
Why is the direct method preferred by standard setters? Which method do you prefer?
Cash Receipts from Customers
• The relationship among cash receipts from customers, revenues from sales, and changes in accounts receivable is:
Definition of Cash Classification of Cash Flows
• Cash may include cash equivalents
– Short-term, highly liquid trading investments that are readily converted to cash within a short period of time (usually within three months)
– Easier to prepare – Reveals less information to competitors
Convert Profit to Net Cash Provided (Used) by Operating Activities – Indirect Method
• Start with profit and add or deduct items not affecting cash to arrive at net cash provided (used) by operating activities
How would the following transaction be reported in the statement of cash flows? “A company acquired a piece of equipment by issuing common shares for part of the cost and obtaining a bank loan for the remainder”
– Adjusts income statement from accrual basis to cash basis in order to arrive at net cash provided (used) by operating activities – However, whereas indirect method adjusts total profit, direct method adjusts each individual revenue and expense account
• Cash receipts and payments are classified into three categories:
– Operating activities – Investing activities – Financing activities
Operating Activities
Convert Profit to Net Cash Provided (Used) by Operating Activities:
Net Cash Provided (Used) by Operating Activities
Indirect Method
Direct Method
• Standard setters prefer the direct method but allow the use of either method • Details cash receipts and payments • Similar to indirect method:
Purpose of the Statement of Cash Flows
• Helps users assess:
– A company’s ability to generate cash – What the company did with the cash
• This is useful in determining:
• If other cash receipts (such as interest), these must be adjusted for any receivable amounts as was done above
Cash Payments to Suppliers
The relationship among cash payments to suppliers, cost of goods sold, changes in inventory, and changes in accounts payable is:
Significant Noncash Activities
• If it does not affect cash, do NOT report in statement of cash flows • Report in separate note to the financial statements • Examples:
FINANCIAL ACCOUNTING
KIMMEL WEYGANDT KIESO TRENHOLM IRVINE
Tools for Business Decision-Making
CHAPTER 13: Cash Flow Statement
STUDY OBJECTIVES
SO 1: Describe the purpose and content of the statement of cash flows. SO 2: Prepare the operating activities section of a statement of cash flows using one of two approaches: (a) the indirect method or (b) the direct method. SO 3: Prepare the investing activities section of a statement of cash flows. SO 4: Prepare the financing activities section of a statement of cash flows. SO 5: Complete the statement of cash flows. SO 6: Use the statement of cash flows to evaluate a company’s liquidity and solvency.
• Lending money and collecting the loans • Generally includes non-current asset items (e.g., long-lived investments, property, plant, and equipment) on the statement of financial position
Financing Activities
• Obtaining cash from issuing debt and repaying the amounts borrowed • Obtaining cash from selling common and preferred shares and paying dividends • Generally includes non-current liabilities, and shareholders’ equity items
– Company’s ability to generate future cash flows – Investing and financing transactions during the period, and effect upon capital structure – Making comparisons with other companies
Cash Payments for Operating Expenses
• Most companies favour the indirect method for the following reasons
• Cash effects of transactions that create revenues and expenses that enter into determination of profit • Includes relevant noncash current assets and current liabilities on the statement of financial position
– Issue of debt to purchase assets – Issue of shares to purchase assets – Conversion of debt into equity – Exchange of property, plant, and equipment
Discussion Question
Format of Cash Fling the Statement of Cash Flows
• • • • Step 1: Prepare operating activities section Step 2: Prepare investing activities section Step 3: Prepare financing activities section Step 4: Complete the statement of cash flows
– Where the related account is an income statement account
Investing Activities
• Purchasing and disposing of:
– Long-term investments not held for trading – Long-lived assets
Step 1: Operating Activities
• Determine the net cash provided (used) by operating activities by converting profit from an accrual basis to a cash basis • Conversion may be done by either the indirect method or the direct method
+ Noncash expenses such as depreciation and losses – Noncash revenues and gains + Decreases in noncash current asset accounts and increases in noncash current liability accounts – Increases in noncash current asset accounts and decreases in noncash current liability accounts
Discussion Question
Why is the direct method preferred by standard setters? Which method do you prefer?
Cash Receipts from Customers
• The relationship among cash receipts from customers, revenues from sales, and changes in accounts receivable is:
Definition of Cash Classification of Cash Flows
• Cash may include cash equivalents
– Short-term, highly liquid trading investments that are readily converted to cash within a short period of time (usually within three months)
– Easier to prepare – Reveals less information to competitors
Convert Profit to Net Cash Provided (Used) by Operating Activities – Indirect Method
• Start with profit and add or deduct items not affecting cash to arrive at net cash provided (used) by operating activities
How would the following transaction be reported in the statement of cash flows? “A company acquired a piece of equipment by issuing common shares for part of the cost and obtaining a bank loan for the remainder”
– Adjusts income statement from accrual basis to cash basis in order to arrive at net cash provided (used) by operating activities – However, whereas indirect method adjusts total profit, direct method adjusts each individual revenue and expense account
• Cash receipts and payments are classified into three categories:
– Operating activities – Investing activities – Financing activities
Operating Activities
Convert Profit to Net Cash Provided (Used) by Operating Activities:
Net Cash Provided (Used) by Operating Activities
Indirect Method
Direct Method
• Standard setters prefer the direct method but allow the use of either method • Details cash receipts and payments • Similar to indirect method:
Purpose of the Statement of Cash Flows
• Helps users assess:
– A company’s ability to generate cash – What the company did with the cash
• This is useful in determining:
• If other cash receipts (such as interest), these must be adjusted for any receivable amounts as was done above
Cash Payments to Suppliers
The relationship among cash payments to suppliers, cost of goods sold, changes in inventory, and changes in accounts payable is:
Significant Noncash Activities
• If it does not affect cash, do NOT report in statement of cash flows • Report in separate note to the financial statements • Examples:
FINANCIAL ACCOUNTING
KIMMEL WEYGANDT KIESO TRENHOLM IRVINE
Tools for Business Decision-Making
CHAPTER 13: Cash Flow Statement
STUDY OBJECTIVES
SO 1: Describe the purpose and content of the statement of cash flows. SO 2: Prepare the operating activities section of a statement of cash flows using one of two approaches: (a) the indirect method or (b) the direct method. SO 3: Prepare the investing activities section of a statement of cash flows. SO 4: Prepare the financing activities section of a statement of cash flows. SO 5: Complete the statement of cash flows. SO 6: Use the statement of cash flows to evaluate a company’s liquidity and solvency.
• Lending money and collecting the loans • Generally includes non-current asset items (e.g., long-lived investments, property, plant, and equipment) on the statement of financial position
Financing Activities
• Obtaining cash from issuing debt and repaying the amounts borrowed • Obtaining cash from selling common and preferred shares and paying dividends • Generally includes non-current liabilities, and shareholders’ equity items
– Company’s ability to generate future cash flows – Investing and financing transactions during the period, and effect upon capital structure – Making comparisons with other companies
Cash Payments for Operating Expenses