Statement of cash flows : It is one of the financial statement that shows the cash and cash equivalents of a company for a particular period. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financing activities of a company. Type of activities reported in statement of cash flows: Cash flows from operating activities: In this direct method, cash flow from operating activities is computed by using all cash receipts and cash payments during the year. The below table shows the way of calculation of cash flows from operating activities: Cash flows from operating activities (Direct method) Add: Cash receipts. Cash receipt from customer Less : Cash payments: To supplier For operating expenses Income tax expenses Net cash provided from or used by operating activities Table (1) Cash flows from investing activities: Cash provided by or used in investing activities is a section of statement of cash flows. It includes the purchase or sale of equipment or land, or marketable securities, which is used for business operations. The below table shows the way of calculation of cash flows from investing activities: Cash flows from investing activities Add: Proceeds from sale of fixed assets Sale of marketable securities / investments Interest received Dividend received Deduct: Purchase of fixed assets/long-lived assets Purchase of marketable securities Net cash provided from or used by investing activities Table (2) Cash flows from financing activities: Cash provided by or used in financing activities is a section of statement of cash flows. It includes raising cash from long-term debt or payment of long-term debt, which is used for business operations. The below table shows the way of calculation of cash flows from financing activities: Cash flows from financing activities Add: Issuance of common stock Proceeds from borrowings Proceeds from issuance of debt Issuance of bonds payable Deduct: Payment of dividend Repayment of debt Interest paid Redemption of debt Repurchase of stock Net cash provided from or used by financing activities Table (3) To Identify: Whether each of the given items as operating, investing, or financing activities in the statement of cash flows.

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Chapter 14, Problem 14.1APE

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Statement of cash flows: It is one of the financial statement that shows the cash and cash equivalents of a company for a particular period. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financing activities of a company.

Type of activities reported in statement of cash flows:

Cash flows from operating activities: In this direct method, cash flow from operating activities is computed by using all cash receipts and cash payments during the year.

The below table shows the way of calculation of cash flows from operating activities:

Cash flows from operating activities (Direct method)

Add: Cash receipts.

         Cash receipt from customer

Less: Cash payments:

To supplier

For operating expenses

Income tax expenses

Net cash provided from or used by operating activities

Table (1)

Cash flows from investing activities: Cash provided by or used in investing activities is a section of statement of cash flows. It includes the purchase or sale of equipment or land, or marketable securities, which is used for business operations.

The below table shows the way of calculation of cash flows from investing activities:

Cash flows from investing activities

Add: Proceeds from sale of fixed assets

         Sale of marketable securities / investments

         Interest received

         Dividend received

Deduct: Purchase of fixed assets/long-lived assets

              Purchase of marketable securities

Net cash provided from or used by investing activities

Table (2)

Cash flows from financing activities: Cash provided by or used in financing activities is a section of statement of cash flows. It includes raising cash from long-term debt or payment of long-term debt, which is used for business operations.

The below table shows the way of calculation of cash flows from financing activities:

Cash flows from financing activities

Add: Issuance of common stock

          Proceeds from borrowings

          Proceeds from issuance of debt

          Issuance of bonds payable

Deduct: Payment of dividend

              Repayment of debt

              Interest paid

              Redemption of debt

              Repurchase of stock

Net cash provided from or used by financing activities

Table (3)

To Identify: Whether each of the given items as operating, investing, or financing activities in the statement of cash flows.

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