Question

1.How are purchases and sales reported on the statement of cash flows? 2.“Depreciation is an integral...

1.How are purchases and sales reported on the statement of cash flows?

2.“Depreciation is an integral part of cash flows statement”. Explain what it means.

3.A company used cash for both operating and investing activities, but had a positive cash

flow from financing activities. What does this cash flow pattern suggest about this

company?

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Answer #1
1. In Direct method , Amount receipt on account of cash sale made and from account receivable is shown in Cash Flow statement.
Amount Paid to supplier for purchase of material is shown in cash Flow Statement
In Indirect method , Net Income is shown in operating activities which is resultant of sales and purchase made during the year and net income earned from operating activities , no sale and purchase amount are not shown directly in cash flow statement .
2. Yes , it can be said that Depreciation is integral part of Cash flow Statement because , Depreciation is a non cash expense which need to added back in Net Income , to get actual amount cash flow from Operating activities
3. In Such cash, it shows that company is raising fund from various sources to meet excess outflow from operating activities
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