PAS 7 – Statement of Cash Flows

Cash – comprises of cash on hand and demand deposits

Cash – short term, highly liquid investments that are
readily convertible to cash which are subject to
insignificant risk

Presentation of cash flows

Operating Activities Investing Activities Financing Activities

These are primarily derived from
the principal revenue-producing
activities.
May be presented in two ways:
a) Direct Method – major classes
of cash receipts and cash
payments are disclosed
b) Indirect Method – profit or
loss is adjusted for the effects
of transactions of a non-cash
nature.
Examples:
1. Cash receipts from sale of goods
and services
2. Interest paid and received
3. Dividends received
4. Dividends paid (determine ability
of entity to pay dividends)
5. Taxes on income
Cash flows represent the extent
to which expenditures have been
made for resources intended to
generate future income and cash
flows.
Examples:
1. Cash payments to acquire property,
plant and equipment, intangibles and
other long-term assets
2. Cash receipts from sale of property,
plant and equipment
3. Cash receipts from sales of equity or
debt/instruments of other entities
4. Interest received (return on
investment)
5. Dividends received (return on
investment)
It is useful in predicting claims
on future cash flows by providers
of capital to the entity
Examples:
1. Cash proceeds from issuing shares or
other equity instruments
2. Cash payments to owners to acquire
or redeem the entity’s shares
3. Cash proceeds from issuing
debentures, loans, notes, bonds,
mortgages, and other short-
term/long-term borrowings
4. Cash repayments of amounts
borrowed
5. Cash payments by a lessee for the
reduction of the outstanding liability
relating to a lease