Scribd
Upload
43 views

Statement of Cash Flows - Operating

The document discusses the statement of cash flows and operating activities. It states that the statement of cash flows classifies cash flows into operating, investing and financing activities, with operating activities involving principal revenue activities. It provides examples of cash flows from operating activities, such as cash receipts from sales and payments to suppliers. It also notes that operating cash flows can be presented using the direct or indirect method.

Uploaded by

Paula De Rueda
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
43 views

Statement of Cash Flows - Operating

The document discusses the statement of cash flows and operating activities. It states that the statement of cash flows classifies cash flows into operating, investing and financing activities, with operating activities involving principal revenue activities. It provides examples of cash flows from operating activities, such as cash receipts from sales and payments to suppliers. It also notes that operating cash flows can be presented using the direct or indirect method.

Uploaded by

Paula De Rueda
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

STATEMENT OF CASH FLOWS - OPERATING

Statement of Cash Flows

The statement of cash flows shall report cash flows during the period classified by operating, investing
and financing activities.

Operating activities are the principal revenue-producing activities of the entity and other activities that
are not investing or financing activities.

Investing activities are the acquisition and disposal of long-term assets and other investments not
included in cash equivalents.

Financing activities are activities that result in changes in the size and composition of the contributed
equity and borrowings of the entity.

Cash Flows from Operating Activities

The amount of cash flows arising from operating activities is a key indicator of the extent to which the
operations of the entity have generated sufficient cash flows to:
a. repay loans;
b. maintain the operating capability of the entity;
c. pay dividends; and
d. make new investments without recourse to external sources of financing.

Operating cash flows generally result from the transactions and other events that enter into the
determination of profit or loss. Examples of cash flows from operating activities are:
a. cash receipts from the sale of goods and the rendering of services;
b. cash receipts from royalties, fees, commissions and other revenue;
c. cash payments to suppliers for goods and services;
d. cash payments to and on behalf of employees;
e. cash payments or refunds of income taxes unless they can be specifically identified with
financing and investing activities;
f. cash receipts and payments from contracts held for dealing or trading purposes; and
g. cash advances and loans made by financial institutions are usually classified as operating
activities since they relate to the main revenue-producing activity of that entity.

In addition, expenditures that were not qualified to be capitalized as assets shall be reported within
operating activities.
Presentation of Operating Cash Flows

Operating cash flows can be presented using either the direct method or the indirect method, with the
direct method being encouraged to be used.

Under the direct method, the major classes of gross cash receipts and gross cash payments are disclosed.

Under the indirect method, the profit or loss is adjusted for the effects of the following:
a. transactions of a non-cash nature such as depreciation, provisions, deferred taxes, unrealized
foreign currency gains and losses, and undistributed profits of associates;
b. changes during the period in inventories and operating receivables and payables;
c. any deferrals or accruals of past or future operating cash receipts or payments; and
d. items of income or expense associated with investing or financing cash flows.

You might also like