Deck 24: Statements of Cash Flows

Question 1

To increase the cohesiveness of financial statements the IASB/FASB joint project is suggesting that the statements of comprehensive income; financial position and cash flow should use the same section names.Which of these is not one of the proposed sections?

A)Business
B)Outlay
C)Financing
D)Income taxes

Answer 1

B

Question 2

The definition of cash equivalents in IAS 7 includes short-term,highly liquid investments which can be converted to a known amount of cash,with an insignificant risk of changes in value

Answer 2

True

Question 3

Which of these best describes the direct method of determining cash flows from operating activities?

A)Determination from adjusting net profit for non- cash receipts and payments
B)Determination from the comprehensive statement of income
C)Determination from the statement of financial position
D)Determination from cash receipts and payments

Answer 3

D

Question 4

Which of these is NOT a problem associated with drawing up a statement of cash flows?

A)The choice of category for interest and dividends
B)The historical nature of the statement of cash flows
C)The arbitrary three- month cut off for cash equivalents
D)The potential for confusion between indirect and direct cash flow statements

Question 5

Cash flow and funds flow statements both concentrate on the inflow and outflow of cash

Question 6

The IASB views cash flow reporting as so important that there are no exemptions for any entities under IAS 7

Question 7

The UK ASB and IAS 7 both require the direct method of determining cash flow.

Question 8

Why do cash flow statements provide a useful addition to the statement of comprehensive income and statement of financial position of an entity?

A)cash flow statements provide a useful insight into the entities compliance with IASB's regulations
B)cash flow statements provide a useful insight into the entities incomplete transactions,where profit or loss can only be estimated by means of the accruals concept
C)Cash flow statements provide a useful insight into the entities profit margins
D)Cash flow statements provide a useful insight into the entities income

Question 9

Cash flow statements can deal with non- cash transactions

Question 10

How does IAS 7 require cash flows during a period to be reported?

A)The cash flows generated by operating activities,investing activities and financing activities are listed,together with the net change in cash and cash equivalents.
B)Only the net change in cash and cash equivalents is required
C)The cash flows generated by operating activities,investing activities and financing activities are listed in their constituent parts,together with the net change of cash and cash equivalents
D)Total cash flows must be generated on a monthly basis to show trends over the financial year