- March 30, 2021 at 9:09 pm #6155437fsaParticipant
- Topics: 58
- Replies: 41
How are you?
I hope you are doing well,
Regarding cash flow statement actually iam very confused about how can I workout i don’t understand the base of preparation like its mainly concerned about Cash base instead accrual base but for example if we use cash base then according to my understanding we should record the transaction according to cash in and out but here in statement of cash flow for example increase in short term liability refers to cash in flow which it doesn’t make sense since I don’t receive money from suppliers just I got more inventory but as we all know cash base it’s just concerned about Cash could you clarify why the increase in short term liability considers as increase in cash in flow?
In your nice lecture you calculated the additional to fixed assets and you considered that as cash out flows but how did you make sure that this additional in fixed assets it’s in cash since no clause is mentioned about buying fixed assets in cash could you explain that as well?April 1, 2021 at 5:34 pm #615699P2-D2Keymaster
- Topics: 4
- Replies: 6450
If there is an increase in the liability then you have not paid the amounts due and so effectively you have more cash in your pocket, hence the increase.
We aren’t told anything else about the PPE so the balancing figure has to be that of the cash paid to acquire PPE in the year.
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