Requirement – 1
Statement of
Statement of cash flow is a financial statement that shows the cash and cash equivalents of a company for a particular period of time. It shows the net changes in cash, by reporting the sources and uses of cash as a result of operating, investing, and financing activities of a company.
Cash flows from operating activities: These refer to the cash received or cash paid in day-to-day operating activities of a company.
Indirect method of cash flow from operating activities: Under this method, the following amounts are to be adjusted from the Net Income to calculate the net cash provided from operating activities.
- Deduct increase in current assets
- Deduct decrease in current liabilities
- Add decrease in current assets
- Add the increase in current liability
- Add
depreciation expense and amortization expense - Add loss on sale of plant assets
- Less gain on sale of plant assets
Cash flow from investing activities: This section of cash flows statement provides information concerning about the purchase and sale of capital assets by the company.
Cash flow from financing activities: This section of cash flows statement provides the information about the
To prepare: The statement of cash flow of Company A under indirect method.
Requirement – 2
Cash flows from operating activities:
These refer to the cash received or cash paid in day-to-day operating activities of a company.
Net income:
Net income is the excess amount of revenue which is arises after deducting all the expenses of a company. In simply, it is the difference between total revenue and total expenses of the company.
To explain: Whether there is possibility to getting positive net income and negative net cash flow from operating activities in the same period, and also discuss the manner in which the negative cash flows affect the confidence in the reliability of the net income amount.
Requirement – 3
To discuss: The manner in which potential employment position helps to get loan, and it have any influence on the loan decision.
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Chapter 11 Solutions
Financial Accounting
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