Questions on Financial Account and Reporting
Question: 01
What are the three types of activities reported in cash flow statements? Explain.
Answer:
The statement of Cash Flow is one of the basic financial statements for a business. It reports a company’s major cash income and outflow for a period. Cash flows are classified as operating, investing, or financing activities on the statement of cash flows, depending on the nature of the transaction.
Cash Flows from Operating Activities:
Operating activities include cash activities related to net income. For example, cash generated from the sale of goods (revenue) and cash paid for merchandise (expense) are operating activities because revenues and expenses are included in net income.
Cash Flows from Investing Activities:
Investing activities include cash activities related to noncurrent assets. Noncurrent assets include:
(1) Long-term investments.
(2) Property, plant, and equipment; and
(3) The principal amount of loans made to other entities.
For example, cash generated from the sale of land and cash paid for an investment in another company are included in this category.
Cash Flows from Financing Activities:
Financing activities include cash activities related to noncurrent liabilities and owners’ equity. Noncurrent liabilities and owners’ equity items include:
(1) The principal amount of long-term debt.
(2) Stock sales and repurchases.
(3) Dividend payments.
Question: 02 Kedzie Kord Company had the following balance sheets and income statements over the last three years (in thousands):
20X1
20X2
20X3
Cash
$561
$387
$202
Receivables
1,963
2,870
4,051
Inventories
2,031
2,613
3,287 Current assets
$4,555
$5,870
$7,540
Net fixed assets
2,581
4,430
4,364
Total assets
$7,136
$10,300
$11,904
Payables
$1,862
$2,944
$3,613
Accruals
301
516
587
Bank loan
250
What are the three types of activities reported in cash flow statements? Explain.
Answer:
The statement of Cash Flow is one of the basic financial statements for a business. It reports a company’s major cash income and outflow for a period. Cash flows are classified as operating, investing, or financing activities on the statement of cash flows, depending on the nature of the transaction.
Cash Flows from Operating Activities:
Operating activities include cash activities related to net income. For example, cash generated from the sale of goods (revenue) and cash paid for merchandise (expense) are operating activities because revenues and expenses are included in net income.
Cash Flows from Investing Activities:
Investing activities include cash activities related to noncurrent assets. Noncurrent assets include:
(1) Long-term investments.
(2) Property, plant, and equipment; and
(3) The principal amount of loans made to other entities.
For example, cash generated from the sale of land and cash paid for an investment in another company are included in this category.
Cash Flows from Financing Activities:
Financing activities include cash activities related to noncurrent liabilities and owners’ equity. Noncurrent liabilities and owners’ equity items include:
(1) The principal amount of long-term debt.
(2) Stock sales and repurchases.
(3) Dividend payments.
Question: 02 Kedzie Kord Company had the following balance sheets and income statements over the last three years (in thousands):
20X1
20X2
20X3
Cash
$561
$387
$202
Receivables
1,963
2,870
4,051
Inventories
2,031
2,613
3,287 Current assets
$4,555
$5,870
$7,540
Net fixed assets
2,581
4,430
4,364
Total assets
$7,136
$10,300
$11,904
Payables
$1,862
$2,944
$3,613
Accruals
301
516
587
Bank loan
250