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: 6

Answer

Many activities in a company are non-cash activities which do not involve cash. Non Cash activities are not reported in the body of the statement of cash flows. 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. Company FC also reports "Non cash investing and financing activities" at the bottom in a separate schedule of its statement of cash flows.

Work Step by Step

Some examples of significant non-cash transactions which will be reported in this section are: Issuing Common stock to purchase assets of a company. Converting bonds of the company into common stock, Issuing debt of the company to purchase assets. Non cash activities are therefore disclosed in a separate schedule to satisfy the full disclosure principle.
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