University:
McMaster University
Course:
ACC 928 | Introductory Management Accounting
Academic year:

2022
Views:

58

Pages:

2
Author:

Sabrina S.

1. Operating Activities: Primarily consist of day-to-day profit-making activities of the company. Making/buying/selling inventory, selling services, paying employees, advertising. These activities typically affect current asset accounts like inventory & accounts receivable, and current liability accounts like salaries payable & accounts payable. Operating activities include activities that affect net income (not just OI). This category also includes receiving interest income or paying interest expense, receiving dividend income, current assets, & current liabilities. Cash received from sale of merchandise Interest income Dividend income Cash paid for purchase of inventory Salaries, general & admin expenses Non-Cash Adjustments: Depreciation Amortization of intangible assets 2. Investing Activities: Include transactions that involve buying/selling long-term assets. Transactions that affect long-term assets are classified as investing activities on the statement of cash flows. Cash received from sale of property, plant, or equipment Collection of long-term loans (investments) Sale of long-term equity (stock) investments Cash paid for purchase of property, plant, or equipment Purchasing long-term equity (stock) investments 3. Financing Activities: Include transactions that either generate capital for the company or pay it back. Like selling company stock, issuing long-term debt, buying back company stock, paying dividends to stockholders. Transactions that affect long-term liabilities & stockholders' equity are classified as financing activities on the statement of cash flows. Cash received from: Issuing stock Issuing long-term debt Selling stock Cash used to: Pay back long-term debt Buy back company stock (treasury stock) Understand the types of transactions that are included in Operating/Financing/Investing activities. Operating Activities: affect net income, current assets, current liabilities. Investing Activities: affect long-term assets. Financing Activities: affect long-term liabilities & owner's equity. Understand how to prepare a statement of cash flows using the indirect method. The direct method lists the receipt & payment of cash for specific operating activities. Cash receipts from customers Cash payments (to suppliers) for purchase of inventory Cash payments (to employees) for salaries & wages