Академический Документы
Профессиональный Документы
Культура Документы
BEA1007 Accounting II
Dr Petros Vourvachis
p.vourvachis@exeter.ac.uk
Office (STC 0.18) hours:
Fridays 11-1
About today
Well discuss the 8th
Accounting II topic with
particular objectives to:
Understand the
importance of cash to a
business, and,
appreciate the need for
a statement of cash
flows and prepare it!
2
Definitions
This lectures focus on reporting cash flows.
According to IAS 7 (the relevant standard):
Cash is notes and coins in hand and deposits in
banks and similar institutions that are accessible
on demand
Cash equivalents is short-term, highly liquid
investments, readily convertible into known
amounts of cash, subject to insignificant risk of
change in value, held for the purpose of meeting
short-term cash commitments rather than for
4
investment
Importance of cash
Income statement
Statement of
financial position
at the start of the
accounting period
Cash and
cash
equivalents
Equity
Statement of
financial position
at the end of the
accounting period
Statement of
cash flows
Cash and
cash
equivalents
CFS development
CFS development
Debtors
Creditors
13
CFS breakdown
Operating activities
Investing activities
Financing activities
14
CF from operating
activities
15
16
CF from investing
activities
Shows the net cash flows from making
new investments and disposing of
existing ones:
Cash payments to acquire non-current assets
Cash receipts from disposal of non-current
assets
Receipts from investments made outside the
company
Interest received on loans
Dividends received from equity investments
16
17
CF from financing
activities
Shows the net cash flows of raising and
paying back long-term finance:
Cash received from borrowing obtained
Cash repaid to redeem borrowings
Cash received from share issues made
Can include dividend payments made by the
business here, or under operating activities
Cash flows
from investing activities
plus or
minus
plus or
minus
Cash flows
from financing activities
equals
18
Cash and
cash
equivalent
balances
Investing
activities
Financing
activities
20
21
Not much
A bit
A lot
I bought a
paper copy
22
23
1.
2.
3.
4.
Cash flows
activities
Cash flows
Cash flows
Cash flows
from operating
from normal activities
from trading activities
from ordinary activities
25
26
1.
2.
3.
4.
27
1.
2.
3.
4.
28
Methods of calculation
The direct method gives a clearer picture of cash flows and provides
details that are not available under the indirect method but (although a
matter of routine when computers are used, it still) needs more work to
identify all the operating flows form the cash records through detailed
analysis of bookkeeping records.
The indirect method takes the approach that, while the profit (loss) for
the year is not equal to the net inflow (outflow) of cash from
operations, they are fairly closely linked to the extent that appropriate
adjustment of the figure for profit (loss) for the year will produce
the correct figure for cash flow. It is easier to prepare and highlights
the effects of working capital on cash flows
plus
plus or minus
plus or minus
plus or minus
less
Interest paid
less
Taxation paid
Dividend paid
less
equals
32
33
A template CFS
34
True
False
35
36
Reduce
Ignore
Add
Deduct
37
Depreciation
Issue of loan notes
Credit sales
Credit purchases
38
39
40
Tax paid
Loan interest paid
Depreciation of non-current assets
Repayment of loan notes
41
42
Torrent plc
43
Torrent plc
Cash flow from operating activities
----
Adjustments for:
Depreciation
----
Interest expense
----
----
----
Decrease in inventories
----
----
Interest paid
----
Taxation paid
----
Dividend paid
----
---44
Torrent plc
Cash flows from investing activities
Payments to acquire tangible non-current assets
----
----
----
----
----
----
----
---45
Torrent plc
46
Torrent plc
47
48
Homework question
49
Homework question
50