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Cash Flow Statement: Taxation Cash Flows

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Cash Flow Statement: Taxation Cash Flows

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Questions and Answers

According to the passage, why are interest and dividends received classified as cash inflows from investing activities?

They are the returns from investment activities, not operating activities. (correct)

They are classified this way for consistency purposes in the textbook.

They represent the cost of obtaining and retaining finance such as loans and equity.

They form part of the determination of profit or loss and should be disclosed there.

What is the purpose of the indirect method in the statement of cash flows?

To calculate the cash flows for individual items that make up operating activities.

To classify interest and dividends paid and received as financing and investing cash flows respectively.

To portray all pro formas in a consistent manner as described in the textbook.

To start with the reported net income and adjust it for non-cash transactions and changes in working capital. (correct)

According to the passage, which of the following is an example of a source of funds?

A decrease in trade receivables. (correct)

An increase in inventory.

An increase in trade receivables.

A decrease in trade payables.

Which of the following is an example of an application of funds according to the passage?

An increase in trade receivables. Signup and view all the answers

What is the key difference between the direct and indirect methods of preparing the statement of cash flows?

The direct method calculates cash flows for individual operating activities, while the indirect method starts with net income and adjusts for non-cash items. Signup and view all the answers

According to the passage, why are items included in points 1 and 2 of the indirect method adjustments not considered actual movements of cash funds?

They are purely accounting adjustments that arise from the accruals/matching basis of preparing the statement of profit or loss. Signup and view all the answers

Which of the following statements about cash generated from operations is true?

It is calculated before payments for interest, taxes, and income from investments. Signup and view all the answers

Where is the tax on operating activities included in the statement of cash flows?

It is included under the 'cash flows from operating activities' classification. Signup and view all the answers

Which of the following taxes is included in the tax cash flows discussed in the text?

Income tax (corporation tax) Signup and view all the answers

If a portion of the tax expense is attributable to investing activities, where would that tax cash flow be included?

Under the 'cash flows from investing activities' classification Signup and view all the answers

According to IAS 7 (International Accounting Standard 7), where can interest paid, interest received, dividends paid, and dividends received be disclosed?

They can be disclosed within 'net cash flows from operating activities' or separately disclosed after 'cash generated from operations'. Signup and view all the answers

In this introductory textbook, where are all taxation entries assumed to be disclosed?

Under the 'cash flows from operating activities' classification Signup and view all the answers