I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

PART F: PREPARING BASIC FINANCIAL STATEMENTS 

 

384

 

figures emerge. The relationship between profit and cash flows can be analysed, as can changes in prices 

over time. All this information helps management to control costs by controlling cash flow. 

1.5 Definitions 

The standard gives the following definitions, the most important of which are cash and cash equivalents. 

 

'

Cash

 comprises cash on hand and demand deposits. 

 

Cash equivalents 

are short-term, highly liquid investments that are readily convertible to known 

 

amounts of cash and which are subject to an insignificant risk of changes in value. 

 

Cash flows 

are inflows and outflows of cash and cash equivalents. 

 

Operating activities 

are the principal revenue-producing activities of the entity and other 

 

activities that are not investing or financing activities. 

