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Terms

A. Recognition G. Gains
B. Comprehensive Income H. Net Income
C. Faithful representation I. Earnings
D. Revenues J. Realization
E. Predictive Value K. Replacement Cost
F. Comparability L. Current Market Value
1. Component of relevance. E
2. Increases in net assets from incidental or peripheral
transactions affecting an entity.
G
3. The process of converting noncash resources and rights
into cash or claims to cash.
J
4. Enhancing qualitative characteristic of relevance and
faithful representation.
F
5. The process of formally recording an item in the
financial statements of an entity after it has met existing
criteria and been subject to cost-benefit constraints and
materiality thresholds.
A
6. All changes in net assets of an entity during a period
except those resulting from investments by owners and
distributions to owners.
B
7. Inflows or other enhancements of assets of an entity or
settlements of its liabilities from delivering or producing
goods, rendering services, or other activities that
constitute the entity's ongoing operations.
D
8. The amount of cash, or its equivalent, that could be
obtained by selling an asset in orderly liquidation.
L
9. The quality of information that helps users to increase
the likelihood of correctly forecasting the outcome of past
or present events.
E
10. A performance measure concerned primarily with cash-
to-cash cycles.
I
Table 1
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What is the cash flow category for
collections of principal amounts on loans
made to other entities?
The category is Investing.
List the required categories for the
Statement of Cash Flows.
Net cash inflow or outflow from Operating Activities; Net cash inflow or
outflow from Investing Activities; Net cash inflow or outflow from
Financing Activities; Effects of Foreign Currency Translation;
Reconciliation of net cash inflows/outflows with the reported change in
cash and cash equivalents on the Balance Sheet; Non-cash Investing and
Financing Activities. What is the cash flow category for
interest paid and received?
This category is Operating Activities.
What is the basic purpose of the
statement of cash flows?
The basic purpose is to provide information about the cash receipts and
cash payments for an entity to help investors, creditors, and others.
Name the four major sections in the direct
method cash flow statement.
Operating cash flows; Investing cash flows; Financing cash flows;
Reconciliation of net income and net operating cash flows.
What is the indirect method on the
statement of cash flows?
Reconciles net income to cash flows from operating activities.
Name the two formats permitted for the
statement of cash flows.
Indirect; direct
What is the direct method on the
statement of cash flows?
This method presents actual inflows and outflows from cash operations.
Must also disclose the indirect method (reconciliation of net income to cash
flows from operations) as a supporting schedule.
When is a Statement of Cash Flows
required?
For all business enterprises that report both financial position (Balance
Sheet) and results of operations (Income Statement) for a period.
What is reported on the Statement of
Cash Flows?
Information about the cash receipts and cash payments for an entity; The
difference between net income and net operating cash flows; Information
about investing and financing activities which do not involve cash inflows
or outflows.
What is the reporting basis of the
statement of cash flows?
The reporting basis is cash and cash equivalents.
The first major section of the Statement
of Cash Flows reports cash flow from
operating activities.
TRUE
In the body of the Statement of Cash
Flows, only the "Cash Flows from
Operating Activities" section can be
different based on the method -- direct or
indirect -- used.
TRUE
The method used for presenting "Cash
Flows from Operating Activities," direct
or indirect, will affect how "Cash Flows
from Investing Activities" is presented.
FALSE
The Statement of Cash Flows provides
information that is useful to parties
external to the entity.
TRUE
The method used for presenting "Cash
Flows from Operating Activities," direct
or indirect, will affect how "Net Effect of
Foreign Currency Translation" is
presented.
FALSE
OIFF ("O IFF I could only remember") is
the mnemonic that reflects the major
sections of the Statement of Cash Flows.
TRUE
Under the indirect method, the
presentation of "Cash Flows from
Operating Activities" begins with Net
Income.
TRUE
The "Net Cash Flows from Operating
Activities" subtotal can be only a positive
amount.
FALSE
An investment in bonds which has been
held for three years will likely be treated
as a cash equivalent during the three
months prior to its maturity.
FALSE
Different additional disclosures will be
required if the direct method is used to
present "Cash Flows from Operating
Activities" than if the indirect method is
used.
TRUE
In order to be treated as a cash
equivalent, an asset must be convertible
into a known amount of cash.
TRUE
The reconciliation of net income with
cash flow from operating activities
presents the same information as the
"Cash Flows from Operating Activities"
presents using the indirect method.
TRUE
The difference between cash at the
beginning of the period and cash at the
end of the period must equal the sum of
the changes reported as cash inflows and
cash outflows.
TRUE
Any of the major sections of the
Statement of Cash Flows may be
presented using either the direct or
indirect method.
FALSE
The "Cash Flows from Financing
Activities" subtotal can be only a negative
amount.
FALSE
If the indirect method is used to develop
"Cash Flows from Operating Activities," a
separate schedule must be provided which
reconciles net income with cash flow.
FALSE
A ten-year treasury note will be treated as
a cash equivalent.
FALSE
The "Cash Flows from Financing
Activities" section of the Statement of
Cash Flows is primarily concerned with
how the entity is financed.
TRUE
The "Cash Flow from Investing
Activities" subtotal of the Statement of
Cash Flows is primarily concerned with
the acquisition and disposal of non-cash
assets.
TRUE
The method used for presenting "Cash
Flows from Operating Activities," direct
or indirect, will affect how "Cash Flows
from Financing Activities" is presented.
FALSE
The direct method of presenting "Cash
Flows from Operating Activities" requires
different additional disclosures than the
indirect method.
TRUE
There is only one way to present "Cash
Flows from Operating Activities" in the
Statement of Cash Flows.
FALSE
The Statement of Cash Flows discloses
only information about cash flows.
FALSE
When the direct method is used to present
"Cash Flows from Operating Activities," a
separate reconciliation of net income with
cash flow from operating activities must
be provided.
TRUE
The direct method of presenting "Cash
Flows from Operating Activities" presents
cash inflows and cash outflows based on
the kind of sources that generated cash
and the kind of recipients to which cash
was paid.
TRUE
Under the indirect method of presenting
"Cash Flows from Operating Activities,"
the presentation begins with net income.
TRUE
The direct method of presenting "Cash
Flows from Operating Activities" requires
an additional disclosure to reconcile net
income to cash flows from operating
activities.
TRUE
The "Cash Flows from Operating
Activities" section of the Statement of
Cash Flows reports only cash inflows.
FALSE
The net change in cash (and cash
equivalents) for a period is known.
TRUE
The "Net Cash Flows from Investing
Activities" section can be positive or
negative.
TRUE
The Statement of Cash Flows is a required
financial statement.
TRUE
The amount of "Cash Flows from
Operating Activities" will be the same
whether the direct of the indirect method
is used.
TRUE
Regardless of whether the direct or the
indirect method is used to present "Cash
Flows from Operating Activities" the
remainder of the body of the Statement of
Cash Flows will be the same.
TRUE
The Statement of Cash Flows treats
certain highly liquid assets as cash
equivalents.
TRUE
Operating Activities: Operating Cash Flows Direct Method
Operating Activities: Reconciliation Indirect MEthod
Investing Activities: Investing Cash Flows Direct Method & Indirect Method
Financing Activities: Financing Cash Flows Direct Method & Indirect Method
Type: Inflows (Cash Received) Operating Activity
Type: Cash fromcustomers Operating Activity
Type: Dividends (FromInvestment) Operating Activity
Type: Interest Operating Activity
Type: Sale of trading investments Operating Activity
Type: Cash paid to suppliers
(good/services)
Operating Activity
Type: Cash paid to employees (payroll) Operating Activity
Type: Cash paid for Interest Operating Activity
Type: Cash paid for income taxes Operating Activity
Type: Cash fromsale of long-termassets Investing Activity
Type: Cash fromcollection of loan principal Investing Activity
Type: Cash fromdisposal of debt and
equity securities (of others) (Held-to-
maturity and Available for sale
Classifications)
Investing Activity
Type: Cash fromsale of other productive
asset (e.g. patent; but not inventory)
Investing Activity
Type: Cash paid for purchase of long-term
asset
Investing Activity
Type: lending (to others) Investing Activity
Type: Investment in debt and equity
securities (of others) (HTM and AFS
classification)
Investing Activity
Type: Cash purchase of other productive
assets (e.g. patent; but not inventory)
Investing Activity
Type: Cash received for sale of (own) stock Financing Activity
Type: Cash proceeds fromborrowing
(Bonds, Notes, etc)
Financing Activity
Type: Cash fromIssuing debt Financing Activity
Type: Cash paid for repurchase of own
treasury stock
Financing Activity
Type: Paying back lenders (principal only) Financing Activity
Type: Payment of dividends Financing Activity
IFRS: Interest Paid Operating & Financing
GAAP: Interest Paid Operating
IFRS: Interest Received Operating & Investing
GAAP: Interest Received Operating
IFRS: Taxes Paid Operating, or - Financing or Investing if specifically identified with an item
GAAP: Taxes Paid Operating
IFRS: Dividends Received Operating & Investing
GAAP: Dividends Received Operating
IFRS: Dividends Paid Operating or Financing
GAAP: Dividends Paid Financing
IFRS: Cash & Cash Equivalents May Include bank overdrafts
GAAP: Cash & Cash Equivalents Overdrafts not allowed
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