Explain the conceptual model for the statement of cash flows
What will be an ideal response?
Answer: Firms can prepare the cash flows statement based on changes in balance sheet accounts in terms of the accounting equation: Assets = Liabilities + Stockholders' Equity. This accounting equation can be disaggregated into its various components: cash and cash equivalents (Cash), other current assets (OCA), current liabilities (CL), Noncurrent Assets (NCA), noncurrent liabilities (NCL), capital stock (CS) and retained earnings (RE) to express the changes in cash in terms of changes in the other components: ΔCash = ΔCL + ΔNCL − .ΔOCA − .ΔNCA + ΔCS + ΔRE. For each account, the firm identifies whether the change relates to operating, investing, or financing activities.
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Craft Construction entered into a contract to construct a generator station for a utility customer. The project was started in 2016 and completed in 2017. Cost and other information is presented below
2016 2017 Costs incurred during the year $225,000 $550,000 Estimated costs to complete 450,000 -0- Billings during the year 200,000 700,000 Cash collections during the year 150,000 750,000 Refer to Craft Construction. Assume Craft uses the percentage-of-completion method for revenue recognition. Compute the amount of gross profit for 2016 and 2017. What will be an ideal response?
In international sales of goods, concerns about differences in contract rules between countries can be managed to some extent by stating that the contract is governed by the CISG
a. True b. False Indicate whether the statement is true or false