Statements of cash flows Research Paper Example | Topics and Well Written Essays - 1750 words

Statements of cash flows - Research Paper Example This explains why bank overdrafts are not part of financing activities. Additionally, the information presented on cash flow of IFRS is quick and easy to flow. Each entity is supposed to present cash flow statement in such a way that it gives an appropriate reporting of financing activities, investing, and operating. For instance, during the investing activities, it is expected that the firm acquires and uses the long term assets and other activities in the investment process that are not equivalent to cash flow. Additionally, it outlines investment activities as clearly cut and some of the examples of the investment activities undertaken during this time include paying cash to get the service or good to be used in the long-term service. The good or services involved in this case are the long term and intangible assets. Hence they break down into materials used during self construction, to acquire plant or machinery (Stephen & Norbert). Moreover, cash receipts received after selling an acquired asset should be part of investment activities. It generally involves the sale of a plant, property and equipment. Another thing considered is debt instrument or rather sales equity of entities and the interests acquired through the joint ventures. However, receipts from those entities that are classified as cash equivalent especially if they are held for trading and should be omitted. Furthermore, the advances of loans and cash from other parties are classified in this section together with their cash receipt repayment which includes loans to other parties involved ( AICPA). Other investment activities classifications includes cash gotten from securities like forward, option, future or swap contracts and they should appear on the cash flow statements. It only excludes these securities when the accounts are held for dealing and as a result, the payments are classified in part of financial undertakings. Noting here that, the account may be accounted as a hedge it is theref ore classified in this section of the cash flow. In the operation activities just like in IFRS cash flow method, are various methods that are described as the principal revenue producing operation. Therefore, a cash flow from the operation activities may result after transactions or other conditions bring in ways of profit determination or losses determination. Example of these operation activities are cash gotten from the sale of good or after the firm has rendered some services. It includes the cash received from loyalties, commission, fee and other revenues. Besides, it shows payment of cash on behalf of or to the employee. Also, it include activities like refunding of taxes or any other cash payments made by the company unless they are stated to specifically associate with the other cash flow activities. Actually, it is supposed to include cash received, all payments gotten from an investment, loan among other money contracts held during trading purposes and they are classified as inventory specifically acquired for resale (Stephen & Norbert). It is therefore evident that just like in IFRS, when accounting one should show some transaction under operation activities, which includes the firm selling machinery and this result to the firm gaining or loosing. Therefore, cash flows experienced from these transactions are classified to being from