BU127 Chapter Notes - Chapter 5: Income Statement, Retained Earnings, Share Capital
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BU127 Full Course Notes
Verified Note
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Document Summary
Bu127 chap 5 reporting and interpreting cash flows. Cash inflows and outflows directly related to earnings from normal operations. Purchase of goods for resale, and services. Cash inflows and outflows related to the acquisition or sale of productive facilities and investments in the securities of other companies. Cash inflows and outflows related to external sources of financing (owners and creditors) for the enterprise. Direct method: reports components of cash flows from operating activities as gross receipts and gross payments: reports the cash effects of each operating activity. Relationships to the statement of financial position and the income statement. Additional details concerning selected accounts, transactions and events. Algorithm to creating cf statement (indirect: operating section , adjust profit for depreciation and amortization expense and other items not affecting cash. (from income statement, adjust profit for changes in non-cash operating capital items. (+/- current liabilities /assets. Measures the portion of income that was generated in cash.
