|OPERATING PROFIT INFLOW DECREASE INVESTING INCREASE FINANCING OUTFLOW CASH NON-CASH A statement of cash flows is a useful report that discloses all movements during the period. Classification of cash flows into operating, and financing activities provides insight into where cash came from and what it was spent on. It is important that cash flows from activities is positive, as it indicates that sufficient cash was received from business operations to cover ongoing business outflows. A significant cash under operating activities should be receipts from customers, which will when discounts are offered or when debts are written off as bad. While cost of sales is important to determine it is cash paid to accounts navabl that ic a key under it is cash paid to accounts payable that is a key under activities in the cash flow statement. When determining expense- related outflows, remember the expense incurred belongs in the income statement paid for expenses, Any including prepaid expenses and accrued expenses, represents the cash for the statement of cash flows. activities relate only to the acquisition or disposal of non-current assets. Sometimes a gain or loss on sale is reported, but because these are they do not appear in the statement of cash flows. Relevant items statement of cash flows. Relevant items would be paid for new property,plant and equipment, or cash received from the sale of old assets. To determine these amounts, it is sometimes necessary to reconstruct three ledger accounts. Even though depreciation is a item, it impacts the calculations so must be taken into account. If an asset such as land shows an during the period, do not simply assume cash has been spent on the asset, as there may have been a revaluation item. If an entity which is a has loaned cash to another party, it would be disclosed as an under activities, just like an investment in a physical asset. When such investment in a physical asset. When such loans are repaid to the business, an of cash would be reported. If the section includes all common business-related cash flows, and section focuses on non- the current asset transactions, then cash flows must relate to anything else. These can include changes in equity accounts and non-current liabilities. A share issue involves a cash while the payment of dividends represents a . Where business financing loans during an accounting period, it means more cash has been borrowed by the entity, which is shown as of cash under an activities Penavnment of an Or cash under activities. Repayment of those loans represents a financing cash The reconciliation prepared under the direct method outlines why in the income statement does not agree with the net cash flow from activities. This takes into account items, as well as changes in current assets and liabilities. PROFIT OPERATING INFLOW INVESTING INCREASE DECREASE FINANCING OUTFLOW CASH NON-CASH