The separate disclosure of cash flows arising from investment activities is necessary because they reflect cash receipts and disbursements in relation to resources intended to generate future income and cash flows.
Some examples of cash flows arising from investment activities are:
Cash payments to purchase fixed assets, intangible assets, and other non-current assets, including capitalized development costs and self-built fixed assets.
Cash receipts from the sale of land, buildings, and equipment, as well as intangible assets and other non-current assets.
Cash payments to purchase debt instruments or equity instruments of other entities and joint venture ownership (other than cash payments for instruments deemed to be cash equivalents or instruments held for trading or contract).
Cash received from the sale of debt instruments and other equity instruments and joint venture ownership (other than cash receipts from instruments deemed to be cash equivalents or instruments held for trading or agreement).
Advances and loans are given to other parties (other than advances and loans provided by financial institutions).
Cash receipts from advance payments and loans extended to other parties (other than advances and loans provided by financial institutions).
Cash payments in respect of futures contracts, forward contracts, option contracts, and swap contracts, except where such contracts are held for trading or under contract, or where such payments are classified as financing activities; and
Cash payments from futures contracts, forward contracts, option contracts, and swap contracts unless such contracts are held for trading or contracted purposes, or if such payments are classified as financing activities.
If a contract is intended to hedge an identifiable position then the cash flows of the contract are classified in the same manner as the cash flows from the hedged position.
Separate disclosure of cash flows arising from financing activities is necessary because it is useful for predicting claims against future cash flows by the company’s capital suppliers.
Some examples of cash flows arising from financing activities are:
- Cash receipts from the issuance of shares or other capital instruments;
- Cash payments to shareholders to withdraw or redeem the company’s shares;
- Cash receipts from bond issues, loans, notes, mortgages, and other loans
- Cash payments by the lessee to reduce the balance of the obligations related to the finance lease.
Every company either a goods company or a service company always has an accounting system or accounting system that can be used as a report of all activities or operations of the company.
One accounting note or accounting report that presents financial information is called a Financial Statement.
Financial Statement of the company usually arranged in a systematic and chronological (based on the date of sequence of transactions)
because its function to provide information about the condition of a company.
In addition to the latest corporate conditions that can be known, with the financial statements can also be known the performance of a company in a period.
Financial Statement consists of balance sheet, profit/loss statement, capital/equity change report, cash flow statement/cash flow statement/cash flow statement, and notes to financial statement.
financial statements on trading companies and service firms are essentially the same, few differences exist in the financial statements of trading companies and services.
This is due to the major activity differences in trading companies and services.
In this opportunity one of the financial statements that I will discuss the cash flow financial statements.
cash flow statement has a definition as a financial statement that provides information about cash receipts and disbursements of a company during a period.
The usual things presented or described in the Cash Flow Statement include the amount of cash received,
such as cash income and cash investment from the owner and the amount of cash issued by the company, such as expenses to be incurred,
debt payments, and private taking.
Cash Flow Statement Classification
In the financial statements of cash flows both in goods and services companies, there are 3 parts:
Cash operating activities
Examples of operating cash activities are payment and receivable income, payroll, operational expenses, and so forth. The cash statements of operating activities consist of the principal activities or operations of a company that directly impact cash.
Cash investment activity
Represents a Cash Flow Statement related to the acquisition of the sale and purchase of fixed assets or permanent assets.
Cash funding activity
Cash Flow Statement that relates to owner’s investment, lending of funds, and money making by the owner, Cash Flow Statement requires data/information from the balance sheet of the previous period and the corresponding period and income statement in the relevant period.
From the presentation of existing information in Cash Flow Statement, the report can be interpreted as one form of financial statements that provide information about the acceptance and expenditure of a company’s cash during a period.
The cash flow statements are reports that reveal all cash receipts and disbursements during the accounting period.
The cash flow statements can be used to evaluate the company’s net assets, financial structure (including liquidity and solvency) and the ability to influence the amount and timing of cash flows in order to adapt to changing circumstances and opportunities.
How to Create a Cash Flow Statement
reports prepared or made after the balance sheet.
This report is prepared based on two data sources, namely current statement and current account with a balance sheet of a previous period.
Based on the presentation or form, cash flow financial statements are divided into two categories: direct method and indirect method.
In elemental terms, there is no difference between the two ways of presenting the cash flow statements, the difference lies only in the presentation of cash flows arising from operating activities.
If on direct presentation, the cash flows from operating activities are split into two cash flows: cash inflows and outflow cash flows
then detailed again in some kind of cash receipts or disbursements.
In the indirect method, the cash flows from operating activities are determined by correcting the reported net income in the statements of income (depreciation expense, current and current liabilities and profit/loss).
In general (both direct method and indirect method), there are five steps that can be used as a way of preparing cash flow statement:
calculate the increase/decrease that occurs in cash
calculate and report net cash used in operating activities, using a direct method or indirect method.
You should also calculate and report the net cash used in investing activities
Calculate and report net cash used by financing activities
Then Calculate the flows and sum up the net cash from the combined net cash used by operating, investing, and financing activities with the initial cash balance (as a proof of the similarity with the final cash balance).
Preparation of the correct cash flow statements is useful for the future of the company in the future (to grow and invest capital).
Other Collections of Cash Flow From Financing Activities
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