INTACC3 (04-10-2021)

STATEMENT OF CASH FLOWS

- summarizes operating, investing, and financing activities of an entity

- cash receipts and cash payments of an entity during a period

Primary Purpose: to provide relavant information about cash receipts and cash payments of an entity
during a period

Cash & Cash Equivalent

- must not be restricted

- must be readily available

- cash on hand and demand deposits

- must be near maturing date

- equity securities are not qualified as cash equivalents (only debt securities)

Cash Flows: inflows and outflows of cash and cash equivalent

Three Qualifications

- Classification by Activity

1. Operating Activity

* derived primarily from the principal revenue producing activities of the entity

* result from transactions that enter into the determination of net income or loss'

* cash flows arising from purchase and sale of dealing and trading securities

2. Investing Activity
3. Financing Activity

* cash flows derived from equity capital and borrowing of the entity

* result from:

> equity financing

> debt financing

Noncash Transactions

- statement of cash flows is a "Cash Consept"

- Investing & Financing transactions w/o cash and cash equivalents are not included in the Statement of
Cash Flows (These are disclosed separately)

Interest Paid and Interest Received

- shall be classified as operating cash flow

- Alternatively:

* INTEREST PAID may be classified as financing cash flow (cost of obtaining financial resources)

* INTEREST RECEIVED may be classifies as investing cash flow (return on investment)

Dividends Received and Dividends Paid

- DIVIDENDS RECEIVED: shall be classified as operating cash flow

- Alternatively, may be classifies as investing cash flow (return on investment)

- DIVIDENDS PAID: shall be classified as financing cash flow (cost of obtaining financial resources)

- Alternatively, may be classified as operating cash flow

Income Taxes

- cash flows from income taxes shall be separately disclosed as cash flows from operating activities
 * tax cash flows are often difficult to match to the originating underlying transactions, so most of the
time all tax cash flows are classifies as arising from OPERATING ACTIVITIES

Direct Method

- shows in detail or itemizes the major classes of gross cash receipts and gross payments

- applicable to operating, investing, and financing activities

Indirect Method

- net income or loss is adjusted for the effects of transactions of a noncash nature

- any defferals or accruals of past or future operating cash receipts and payments, and items of income
or expense associated with investing and financing activities

- only applicable to operating activities