Question

Please answer the following. Thanks

10. Describe the relation between Gross PP&E, Net PP&E, and depreciation. 11. How are stocks categorized under financing activities different from stocks categorized under investment activities on the Statement of Cash Flows? 12. Give an example of how are earnings and cash flows can be different? Make sure to apply financial statements terminology when giving an answer.

Answer 1

10)	Gross PP&E represents the original cost of the fixed assets comprised
	of property, plant and equipment.
	From the above is deducted the 'accumulated depreciation' representing
	the total depreciation written off against the assets included in the
	Gross PP&E.
	The amount, net of depreciation, is called the 'Net PP&E' and is the final
	figure shown against PP&E in the balance sheet. However, in the
	balance sheet, the 'Gross PP&E', the 'Accumulated Depreciation' and the
	'Net PP&E' are shown.
11)	Stocks categorized under the investment activities are the investment
	in stocks of other companies, whereas
	Stocks categorized under the financing activities represent the sale of
	own stock and also the purchase of treasury stock (purchase of own
	shares).
12)	Earnings represent the excess of revenue over expenses for a particular
	period prepared under the accrual system of accounting. As it is
	accrual based, it will not represent the actual cash flow from operating
	activites. Besides, it includes non cash expenditure like depreciation,
	amortization and other write offs.
	To get the cash flows from operations one has to adjust the net income
	for non cash expenditure and the increases and decreases in current
	assets and liabilities.