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PAS 7 - Statement of Cash Flows

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Questions and Answers

What is the purpose of presenting cash flows in the statement of cash flows according to different classifications?

To enhance inter-comparability among different accounting treatments (correct)

To confuse stakeholders

To complicate financial reporting

To hinder inter-comparability among different accounting treatments

Which of the following activities does NOT fall under Operating Activities as per the text?

Cash payments for operating expenses

Cash payments for purchasing goods and services

Cash receipts from selling goods

Cash receipts from investments (correct)

Why are cash flows from buying and selling held-for-trading securities classified as operating activities?

Because they are not related to any specific activity

Because they are related to financing activities

Because they do not impact cash flows

Because they are similar to inventories acquired for resale (correct)

In what circumstances are loan transactions of financial institutions classified as operating activities?

When they are part of ordinary revenue-producing activities Signup and view all the answers

Why are cash payments for operating expenses classified as part of operating activities?

Because they enter into the determination of profit or loss Signup and view all the answers

Why do entities that manufacture or acquire items of property, plant, and equipment for rental subsequently transfer them to inventories before sale?

To consider them as operating activities Signup and view all the answers

What is the primary purpose of a statement of cash flows?

To provide information about the sources and utilization of cash equivalents Signup and view all the answers

Which of the following is NOT considered a cash equivalent according to PAS 7?

Stock investments held for more than 3 months Signup and view all the answers

How does the statement of cash flows help users assess an entity?

By assessing the entity's ability to generate cash and cash equivalents Signup and view all the answers

Under PAS 7, what is the maximum period for a debt instrument to qualify as a cash equivalent?

3 months before its maturity date Signup and view all the answers

In what situation might an entity report profit under accrual basis but have negative cash flows from operating activities?

When the entity has significant capital expenditures Signup and view all the answers

What additional information can the statement of cash flows provide about an entity's financial performance?

'Quality of earnings' assessment for the entity Signup and view all the answers