Accounting: The Language of Business - Vol. 2 (Intermediate: Part 71)

A record company used to be a very good thing, but they ended up soul-destroyingly trapping people in the accounting department. And you couldn't get any further, and the heads of each department were changing all the time, so you couldn't have any permanent relationship within the corporation.

John Lydon

Statements of Financial Position and Cash Flows and the Annual Report (Part I) 

by

Charles Lamson

Financing Activities. Financing activities involve the cash receipts and payment from debt and equity financing. Cash flows from financing activities primarily include:

1. Cash receipts from issuing equity to owners.

2. Cash receipts from borrowing through bonds and notes or other debt instruments.

3. Cash payments to repurchase equity from owners.

4. Cash payments for principal on debt

Golden Enterprises's net financing cash flows for the year ended June 3 2016, were $(5,175,042) as Exhibit 6.6 (from Part 70 and reintroduced below) illustrates. The company's financing cash outflows primarily include cash payments for lines of credit, debt, and dividends, Exhibit 6.7 summarizes common cash inflows and outflows by operating, investing, and financing activities. 

EXHIBIT 6.6 Statement of Cash Flows, Golden Enterprises, Financial Statements, June 3rd, 2016

Click graphic to enlarge.

Source: https://www.sec.gov/Archives/edgar/data/42228/000114420416120097/v447241_10ka.htm

EXHIBIT 6.7 Common Cash Inflows and Outflows: Operating, Investing, and Financing Activities

Classification of Dividends, Interest, and Taxes: International Financial Reporting Standards (IFRS)

 IFRS differs from generally accepted accounting principles (GAAP or U.S. GAAP) in the classification of the following items:

1. Cash receipt from interest and dividends
2. Cash payments for taxes
3. Cash payments for interest
4. Cash payments for dividends

As shown in Exhibit 6.8, U.S. GAAP requires companies to report the preceding items in operating cash flows except for the payment of dividends. IFRS grants companies discretion in classifying these items as operating, investing, or financing activities as Exhibit 6.8 illustrates.

EXHIBIT 6.8 Classification of Dividends, Interest, and Taxes

*GORDON, RAEDY, SANNELLA, 2019, INTERMEDIATE ACCOUNTING, 2ND ED., PP. 248-249*

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