Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 12 - Statement of Cash Flows - Questions: 5

Answer

Step1: Many activities in a company are non-cash activities which do not involve cash. Step2: Non cash activities are therefore disclosed in a separate schedule. Step3: Non Cash activities are not reported in the body of the statement of cash flows.

Work Step by Step

Step1: Examples of such activities are: 1. Issuing Common stock to purchase assets of a company. 2. Converting bonds of the company into common stock, 3. Issuing debt of the company to purchase assets. Step2: To satisfy the full disclosure principle. Step3: Instead, companies mention all the non-cash activities in either a separate schedule which is maintained at the bottom of the statement of cash flows or maintained in a separate schedule or sometimes a supplementary schedule is maintained to the financial statements.
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