Some examples of the cash flows from investing activities are given below: Examples of cash inflow from investing activities: The cash flows arising from such activities are shown under investing activities section. Investing activities include acquisition and disposal of long term assets and investments in the form of shares and bonds etc. Cash paid as a result of the settlement of a litigation.Ĭlick here to learn the preparation of operating activities section by direct methodĬlick here to learn the preparation of operating activities section by indirect method (2).Cash payment for expenses such as interest, electricity bills, rent, salaries, wages etc.Cash payment to suppliers for purchase of merchandise or raw materials.Cash received as a result of the settlement of a litigation.Įxamples of cash outflow from operating activities:.Following are the some examples of operating activities that affect cash of the company: Examples of cash inflow from operating activities: In other words, the receipts and payments of cash that occur as a result of revenue and expense transactions are shown under this section.
#Statement of cashflows quizlet plus
These activities include principle revenue generating activities plus other activities that are not investing and financing activities. Operating activities section shows cash flows that arise from operating activities of the company. Sections of the statement of cash flows:Īs described above, the statement of cash flows consists of three sections.
This categorization helps users of financial statements understand how the cash was received and used as the company performed its various operating, investing and financing activities to conduct business during a particular reporting period. When a statement of cash flows is prepared, these three types of cash flows are reported under separate sections, which are operating activities section, investing activities section and financing activities section. Manny reported the $ 56, 000 \$ 56,000 $56, 000 in the same manner on the preceding year's balance sheet.The companies categorize their cash flows into operating, investing and financing cash flows. In addition, Manny knows that the bank will consider a large balance in accounts receivable more favorably than a large personal loan to a single individual. Because Tom is the company president, Manny treats the amount due as part of its normal accounts receivable. Tom has orally assured Manny that he will pay off the loan within the next year. Tom borrowed the money from New Wave 18 months earlier for a down payment on a new home. The accounts receivable balance includes a $ 56, 000 \$ 56,000 $56, 000 loan to Tom Morrow, the company president. In January, this balance sheet will be submitted along with an application for a loan from First Peoples Community Bank. Manny Kinn, the company treasurer and vice president of finance, has prepared a classified balance sheet as of December 31.
New Wave Images is a graphics design firm that prepares its financial statements using a calendar year.
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