payments of the entity during the period. It shows where cash came and from and how it is spent. A.DIRECT METHOD B.INDIRECT METHODS Shows each major class of cash receipts and cash payments. It also provides information which may be useful in estimating future cash flows. Net income is adjusted for the effects of non cash transactions, change in balances of asset accounts and items associated with investing and financing cash flows. A.OPERATING B.INVESTING C.FINANCING
Are primarily derived from the principal revenue-producing activities of the enterprise. They generally result from the transactions and other events that enter into determination of profit or loss. Cash receipts from sale of goods and rendering of services. Cash receipts from royalties, fees, commissions and other revenue Cash payments to supplier of goods and services Cash payments to and on behalf of the employees Cash receipts and payments of an insurance enterprise for premiums and claims, annuities and other policy benefits Cash payments or refunds of income taxes unless they specially indentifies with financing and investing activities Cash receipts and payments from contracts held for dealing or trading purpose. Represent the extent to which expenditures have been made for resources intended to generate future income and cash flows. These affect non trade assets, most of which are classified as noncurrent. Cash payments to acquire property, plant and equipment, intangibles and other long-term assets. Cash receipts from sale of property, plant and equipment, intangibles and other long-term assets.
Cash advances and loans made to other parties (other than financial institution) Cash receipts from repayment of advances and loans made to other parties. Information arising from financing activities is useful in predicting claims on future cash flows by providers of capital to the enterprise. These are transaction with non trade creditors and shareholders. Cash receipts from loans made to a financial institution Cash repayments of amount borrowed Cash received from customers 120,000 Cash paid to suppliers 75,000 Interest received 12,000 Interest paid on bank loans 14,500 Refund for income tax 35,000 Cash paid for rent 35,000 Cash paid for utilities 7,650 Dividends paid 8,700 Payment for 1st installment for bank loan 10,000 Withdrawal of owner 12,540 Proceeds for sale of equipment 6,530 Payment for furnitures purchased 12,550 Payment for equipment purchased 35,460 Additional investment of owner 88,800 Proceeds from bank loan 10,000 WORKBOOK EXERCISES