1. The primary source of funds for the firm in 2003 is (See Figure 301.) A. net profits after taxes. B. an increase in notes payable. C. an increase in longterm debt. D. an increase in inventory. 2. Common stock dividends paid in 2003 amounted to ______. (See Figure 301.) A. P100 B. P50 C. P600 D. P150 3. The firm may have increased longterm debts to finance (See Figure 301.) A. an increase in gross fixed assets. B. an increase in current assets. C. a decrease in notes payable. D. an increase in current assets, an increase in gross fixed assets, and a decrease in notes payable.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
1. The primary source of funds for the firm in 2003 is (See Figure 301.)
A. net profits after taxes.
B. an increase in notes payable.
C. an increase in longterm debt.
D. an increase in inventory.
2. Common stock dividends paid in 2003 amounted to ______. (See Figure 301.)
A. P100
B. P50
C. P600
D. P150
3. The firm may have increased longterm debts to finance (See Figure 301.)
A. an increase in gross fixed assets.
B. an increase in current assets.
C. a decrease in notes payable.
D. an increase in current assets, an increase in gross fixed assets, and a decrease in notes payable.
4. Sources of funds for 2003 totaled ______. (See Figure 301.)
A. P600
B. P700
C. P800
D. P950
5. The firm ______ fixed assets worth ______. (See Figure 301.)
A. purchased; P0
B. purchased; P200
C. sold; P0
D. sold; P200
6. The firm's cash flow from operations is ______. (See Figure 301.)
A. P350
B. P300
C. P150
D. P950
7. Use of funds for 2003 totaled (See Figure 301.)
A. P600
B. P700
C. P800
D. P950
8. The smallest use of funds for the firm in 2003 is (See Figure 301.)
A. a decrease in notes payable.
B. an increase in inventory.
C. dividends.
D. a decrease in longterm debts.
9. The
A. P0
B. P200
C. P50
D. P1,000
10. PETRON Corporation sold a fixed asset for P100,000, which was also its book value. This is
A. an investment cash flow and a source of funds.
B. an operating cash flow and a source of funds.
C. an operating cash flow and a use of funds.
D. an investment cash flow and a use of funds.
11. SMART Corporation raises P500,000 in longterm debt to acquire additional plant capacity. This is considered
A. an investment cash flow.
B. a financing cash flow.
C. a financing cash flow and investment cash flow, respectively.
D. a financing cash flow and operating cash flow, respectively.
12. All of the following are financing
A. sale of stock.
B. payment of stock dividends.
C. increasing debt.
D. repurchasing stock.
13. All of the following are operating cash flows EXCEPT
A. net profit/earnings after tax.
B. increase or decrease in current liabilities.
C. increase or decrease in fixed assets.
D. depreciation expense.
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