Question 1

The statement of cash flows may assist in determining the ability of an entity to:

Accepted Answer

A

Question 2

In accordance with AASB 107 "Cash Flow Statements",cash receipts from sales of property,plant and equipment are classified as cash flows from operating activities.

Accepted Answer

Cash receipts from sales of property, plant and equipment are classified as cash flows from investing activities, not from operating activities, according to AASB 107.

Question 3

If a business consistently has positive cash flows from financing and negative cash flows from investing and operating activities,this is a positive sign for the business:

Accepted Answer

Constantly having negative cash flows from investing and operating activities can indicate that the business is not generating enough profits from its core operations and may be relying on external financing to sustain its operations. This can lead to long-term financial instability and a higher risk for the business.

Question 4

In accordance with AASB 107,non-cash investing and financing transactions are required to be included in the cash flow statement.

Accepted Answer

Non-cash investing and financing transactions are not included in the cash flow statement but are disclosed elsewhere in the financial statements according to AASB 107.

Question 5

Survey research by Jones and Ratnatunga (1997)undertaken in Australia found that respondents indicated that,on average,the statement of cash flows:

Accepted Answer

The survey research by Jones and Ratnatunga (1997) found that respondents believed the statement of cash flows provides greater comparability between companies, is more understandable to users, and is a better indicator of the company's future operating performance, thus encompassing all the given answers.

Question 6

While the statement of cash flows is presently required along with the accrual statements,taking a balanced view,it would be sufficient to meet the accountability needs of general-purpose financial statement users on its own:

Accepted Answer

While the statement of cash flows provides important information regarding a company's cash inflows and outflows, it does not provide enough information alone to meet the comprehensive needs of general-purpose financial statement users. The accrual statements provide additional details regarding a company's financial performance and position, including revenues, expenses, assets, and liabilities. Therefore, both the statement of cash flows and the accrual statements are necessary to provide a complete picture of a company's financial health.

Question 7

A reporting entity is required to prepare a cash flow statement that is in accordance with the requirements of AASB 107 and shall be presented as an integral part of the notes to the accounts.

Accepted Answer

A cash flow statement is a primary financial statement and should be presented as part of the main financial statements, not just as notes to the accounts.

Question 8

Sharma (1996)argues that cash flows from operating activities divided by current debt should replace the current ratio as a measure of liquidity:

Accepted Answer

The answer of Sharma (1996)argues that cash flows from operating...

Question 9

All cash flows from investing and financing activities are required to be reported on a gross basis.

Accepted Answer

Not all cash flows from investing and financing activities are required to be reported on a gross basis. Some are reported on a net basis, depending on the nature of the transactions and the specific requirements of the accounting standards.

Question 10

In accordance with AASB 107 "Cash Flow Statements",cash payments to suppliers for goods and services are classified as cash flows from operating activities.

Accepted Answer

Cash payments to suppliers for goods and services are considered an expense and are thus classified as cash outflows from operating activities in accordance with the guidelines provided by AASB 107.

Question 11

The cash-flow statement effectively provides a reconciliation of the opening and closing cash balances in the balance sheet:

Accepted Answer

The cash-flow statement shows the sources and uses of cash during a specific period, which ultimately reconciles the opening and closing cash balances in the balance sheet. Therefore, the statement effectively provides a reconciliation.

Question 12

The cash-flow statement is argued by researchers to be a more reliable statement than accrual statements:

Accepted Answer

The cash-flow statement provides a more accurate picture of a company's financial health because it shows the actual inflows and outflows of cash, whereas accrual statements are based on accounting rules and estimates. Additionally, the cash-flow statement can help identify any potential cash flow problems and enables investors to evaluate a company's ability to generate and manage cash.

Question 13

AASB 107 requires disclosures about non-cash financing and investing activities:

Accepted Answer

AASB 107 requires disclosures about non-cash financing and investing activities in the notes to the financial statements.

Question 14

To calculate the cash flow from the issue of debentures,the face value of the debentures would have to be adjusted by deducting any premium or adding any discount on issue:

Accepted Answer

The cash flow from the issue of debentures is calculated based on the actual cash received from the issue, which includes the face value plus any premium received or minus any discount given at the time of issue, not by adjusting the face value itself.

Question 15

A cash flow statement is a forecast of net cash flows from operating,investing and financing activities.

Accepted Answer

A cash flow statement is a historical financial statement that shows actual cash inflows and outflows, not a forecast.

Question 16

In accordance with AASB 107 "Cash Flow Statements",a bonus share issue is to be classified under financing activities.

Accepted Answer

A bonus share issue is a non-cash transaction and is not included in the cash flow statement under AASB 107.

Question 17

To calculate the cash flow associated with an accrued expense,any increase in the associated liability should be added to the expense:

Accepted Answer

Accrued expenses are already reflected in the income statement as expenses when incurred, not when paid. Therefore, an increase in the accrued expenses liability does not affect the cash flow directly since it represents expenses that have been recognized but not yet paid in cash.

Question 18

Cash-flow statements should be subdivided into selling,financing and investing categories:

Accepted Answer

Cash-flow statements are typically subdivided into operating, investing, and financing activities, not selling.

Question 19

In accordance with AASB 107 "Cash Flow Statements",dividends paid may be classified as an investing or a financing cash flow.

Accepted Answer

Dividends paid are not classified as either investing or financing cash flow, they are disclosed separately in the cash flow statement under the section of cash flows from operating activities.

Question 20

AASB 107 requires ledger accounts to be reconstructed in order to calculate cash flows from operating activities:

Accepted Answer

AASB 107 (Statement of Cash Flows) does not require the reconstruction of ledger accounts but rather the presentation of cash flows during the period, classified by operating, investing, and financing activities, which can be prepared using either the direct or indirect method for operating activities.

Quiz 20: Cash-Flow Statements