00:03
Hi.
00:04
So we are asked to put the following transactions under the three headings of the statement of cash flows, right? so the three headings that we have are the operating section, which i will denote by an o, right? and i will also denote the investing section by an i and the financing section by an f.
00:34
Then if it does not belong to the statement of cash flows, i will put an x, right? or no.
00:44
Right.
00:45
So now, what we need to understand is what sort of things we put under operating investment and finance, right? and what doesn't belong in the statement of cash flows.
00:58
So the easiest thing to start with is what doesn't belong, right? so what doesn't belong is anything that doesn't involve cash, right? so it means that if there is any transaction that is done on credit, then it must not be included in the statement of cash flows.
01:16
We only deal with things where there's actual movement of cash, cash going in or cash going out, right? and then under our operating section, right, this is basically your everything that falls under your statement of profit and loss or your income statement, right? so that's your sales, your purchases, your expenses, all of that, right? this is what falls under operating activities, right, and your changes in working capital.
01:47
And then under investment, right, under investment, we are going to have ppe, right? plant property and equipment, right? things like that.
02:02
That's what we're going to put under investing.
02:04
And then we also put long -term investments here, right? so if you invest in shares in another company, you may also put it here.
02:18
But take note that it is only long term, not short term.
02:22
And then for if the financing activities, this is relating to things that are to do with the equity and long -term liabilities, right? so if there's anything to do with shares, anything to do with the dividends of those shares and your loan or your debentures, we put it under financing activities, right? so another thing that we need to take note of is that our o is like i said, it's our income statement or statement of profit or loss.
02:55
And then i is going to be a ppe.
02:56
So that's your non -current asset, right? and then f is going to be your equity and liability section.
03:04
So if you look at it, all the sections of the income statement and the balance sheet are covered, right? where we have the current asset and the current liability.
03:14
It's falling under working capital, which i say is under operating activities, right? so now using those two statements, we want to categorize each transaction under oif or x, right? so for the first one, purchased inventory on account, right? this part where they say on account, it means that they recorded it in a credit account, right? otherwise they would have saved for cash right so it means that this inventory was purchased on credit right so i would actually put an x meaning that we do not record this in the statement of cash flows because no cash was involved there was no money movement right and then we move on to the second one where we issued common stock for cash right so now this is involving finance right because we are issuing stock and we're also getting cash right so this is going to be finance right remember finances equity and long -term liabilities then the third one paid loan principle right whenever they say paid it's involving money right so we know definitely there is cash involved right and when you pay this loan principle this is under your long -term liabilities right so it means that this is going to be under if because f is for equity and long -term liability right and then we move on to the next one which is paid interest on loan right now the actual interest that we pay on the loan is not under um long -term liabilities remember where would you record this interest if it was your income statement and your balance sheet you would record it's in the income statement right so things from the income statement where do they fall under it's operating activities, right? and then we go on to lend money to a customer, right? so when you're lending money to your customer, they didn't say loan, right? so i'm assuming that this is short term.
05:31
So basically i'm giving someone a debt, right? i'm not the one in debt, but it's someone else i'm giving money to.
05:38
I expect to get this money back, right? and i assume it's short term since they didn't say it's a loan.
05:45
So i'm going to assume that this is a current asset for me, right? it's a debt.
05:50
It's basically increasing the amount of your debtors, right? people who owe you.
05:55
So debtors is under current assets.
05:57
Current assets and current liabilities, remember, that's working capital under operating activities, right? then we move on to number six.
06:07
I have received cash from sales...