Question John Smith, the owner-manager of Funny Business Pty Ltd, is unfamiliar

Question

Question

John Smith, the owner-manager of Funny Business Pty Ltd, is unfamiliar with the statement of cash flows that you, as his accountant, prepared. He asks for further explanation. Required

Write a brief presentation explaining the form and content of the statement of cash flows as shown in the figure above.

COMPANY NAME Statement of cash flows Period covered Cash flows from operating activities (List of individual items) LX Net cash provided (used) by operating activities Cash flows from investing activities XXI (List of individual inflows and outflows) Net cash provided (used) by investing activities Cash flows from financing activities XAX tr List of individual inflows and outflows) Net cash provided (used) by financing activities Net increase (decrease) in cash Cash at beginning of period Cash at end of period Xxx

Explanation / Answer

Statement of cash Flow is prepared to reconcile beginning cash balance with cash balance at end by showing the net increase /(decrease)in cash during the period .

This statement is basically classified in to three activities

Cash flow from operating activity

Cash flow from Investing activity

Cash flow from Financing activity

a) Cash flow from operating activity includes cash flow that is generated from normal operations of business such as collections from customers ,salary expense ,payment to suppliers ,rent expense ,payment of operating expense etc .

B)cash flow from Investing activity includes cash that is generated/(used ) from investment in to business

such as Sale of equipment ,Dividend on investment made ,purchase of equipment etc .

c)Cash flow from financing activity includes cash that is received or (used) to finance the long term business needs .such as issue of common stock ,repayment of bond ,interest expense on bonds ,dividend paid ,purchase of treasury stock etc .

The sum from all activity is either a increase /(decrease) to cash which is then added to beginning cash balance to get cash balance at end (that matches with cash at balance sheet )

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.