ACCT10001 Chapter Notes - Chapter 7: Cash Flow, Current Liability

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marooncaribou812

5 Aug 2018

School

University of Melbourne

Department

Accounting

Course

ACCT10001

Professor

Noel Boys

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Document Summary

Purpose and usefulness of a statement of cash flows. Statement of cash flows: reports entity"s inflow/outflow of cash for a specified period, shows cash receipt and payment. Important to the working capital (difference bt the amounts of current assets and current liabilities) management of entity. The more times the entity cycles through that process above, the more profit it can make (assuming appropriate pricing) Normally outflow of funds for inventory and wages prior to inflow from sales. Difference bt a sale (revenue generated) and cash received or between a purchase and a payment. The negative cash flow should signal a warning to you that the company is not bringing in cash from its operations. So the company will need to get cash either from borrowing money or by asking investors to put up some more money. Sustaining a cash outflow can"t be done in the long term. Income statement/balance sheet accrual based while statement of cash flow cash based.

Related Questions

Choose the correction answer

15. The statement of cash flowsprovides information to help investors and creditors assess thecash and noncash investing and financing transactions during theperiod.

T F

16. The net increase(decrease) in cash reported on the statement of cash flows shouldreconcile the beginning and ending cash balances reported in thecomparative balance sheets.

T F

17. Anobjective of the statement of cash flows is to

a. disclose changes during the period in all assetand all equity accounts.

b. disclose the change in working capital during theperiod.

c. provide information about the operating,investing, and financing activities of an entity during aperiod.

d. None of these answers are correct.

18. Theprimary purpose of the statement of cash flows is to provideinformation

a. about the operating, investing, and financingactivities of an entity during a period.

b. that is useful in assessing future cash flowprospects.

c. about the cash receipts and cash payments of anentity during a period.

d. about the entity's ability to meet itsobligations and to pay dividends.

19. Cash equivalents are

a. treasury bills, commercial paper, and moneymarket funds purchased with excess cash.

b. investments with original maturities of threemonths or less.

c. readily convertible into known amounts ofcash.

d. All of these answers are correct.

20. Xanthe Corporation had the following transactions occur in thecurrent year:

1. Cash sale of merchandise inventory.

2. Sale of delivery truck at book value.

3. Sale of Xanthe common stock for cash.

4. Issuance of a note payable to a bank forcash.

5. Sale of a security held as anavailable-for-sale investment.

6. Collection of loan receivable.

How many of the above items willappear as a cash inflow from investing activities on a statement ofcash flows for the current year?

a. Five items

b. Four items

c. Three items

d. Two items

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ACCT10001 Chapter Notes - Chapter 7: Cash Flow, Current Liability

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