Chapter 6
77
Statements of Cash Flows
Chapter 6
Statement of Cash Flows
Learning Objectives
By the end of this chapter you should be able to
✓
✓
✓
establish a link between statement of cash flows with other financial statements
explain the terms cash and cash equivalents as used in IAS 7
identify different reasons for cash inflow and outflow within the business
identify the difference between the direct and indirect method of preparing a statement of cash flows
calculate operating profit for preparing statement of cash flows if not given in the question
✓
understand accounting standards like IAS 7 for preparing a statement of cash flows
explain the uses and limitations of a statement of cash flows
✓
identify the users of statement of cash flows
✓
understand the
noncash investing and financing activities
and their disclosure requirements
If a business makes a profit, it is reasonable to assume that its cash and bank balances will improve. On the contrary
if a business makes a loss, its cash and bank balances might suffer. However there are many reasons why the obvious
might not occur, the main one being that cash does not flow into a business at the same time as profits are made.
This is called accrual concept.
According to accrual concept, revenue is earned and expenses are incurred irrespective of the cash movements. As
a result a profitable business, in an accrual based accounting system, may experience liquidity problems. This is so
as high profits do not mechanically transform into high cash flows.
Cash flow is considered to be a company's most important information about its financial standings because cash is
just like the fuel that drives a business, c. In the 1980s many small businesses in UK failed not because they were not
profitable, but because they did not manage their cash resources effectively.
The international accounting standard 1 (IAS 1) states that a company must prepare a statement of cash flows
(previously called cash flow statement) in addition to other main financial statements which include statement of
financial position, income statement, statement of changes in equity and a statement of accounting policies and
explanatory notes.
Income statement is prepared under accrual basis accounting in which businesses match revenues with the expenses
incurred during the same period to generate those revenues. The statement of cash flows reflects a firm's liquidity
or solvency. It includes only receipts and payments of cash and cash equivalents and omits transactions not involving
cash flows.
The statement of cash flows shows a company's flow of cash. It is prepared from changes in statement of financial
position items of current and last years and helps to comprehend the ways employed by the business to raise and
invest money. The amount of cash being received by the business is called cash inflow, and cash being paid by the
business is called cash outflow.
6.1
Classifications of Cash Flows - An example
The statement shows how cash and cash equivalents are affected on account of changes in different income
statement and statement of financial position items. Statement of cash flows has three sections namely operating,
investing, and financing activities.
The first and last sections of a statement of cash flows usually result in increase in cash balance. Operating section
shows that how businesses generate cash from selling goods and rendering services; Financing activities show the
ways of "raising" funds by issuing shares and debentures. The second section under IAS 7 shows how a business
spends cash by making investment in its future growth.
The initial money needed at the inception of a business is either invested by the owners or could be borrowed. This
is the way of “financing” a new company and is shown as cash flow from “financing activities”. Generally, any cash
transaction that affects equity or a long-term liability would be reported in financing section of statement of cash
flows.
Chapter 6
78
Statements of Cash Flows
These initial funds are used to buy assets needed to run the business. In other words, any cash transaction that
affects a non-current asset would be reported in investing section of statement of cash flows.
After raising necessary finance and buying required assets the business starts doing the business. It starts its
operations through selling its goods and services and by making payments for its running costs. All cash flows related
to operating and running the business would be included in operating activities. In general, all income statement
items may be reported in the operating section of the statement of cash flows.
6.2
Cash and Cash Equivalents
Cash for the purposes of the statement under IAS 7 includes cash and cash equivalents so in a statement of cash
flows cash equivalents are treated in the same way as cash.
6.2.1
Cash
Cash includes cash in hand and demand deposits held in current accounts
6.2.2
Cash Equivalents
Cash equivalents are highly liquid short-term investments easily convertible to known amounts of cash without
a significant risk of change in their values. These usually include money held in a short-term deposit account
that can be withdrawn within three months from the date of deposit.
6.2.3
Bank Overdrafts
Bank overdrafts are amounts repayable to bank on demand so are included in cash and cash equivalents.
6.3
Preparation of a Statement of cash flows
Preparation of a statement of cash flows requires the following information.
Income statement for the current year
The statement of financial position (balance sheet) of the current year
The statement of financial position (balance sheet) of the last year
Supplementary information from the statement of financial position accounts given in notes
6.4
Cash Flow from Operating Activities
Cash flows from operating activities arise from the transactions related to the company's ongoing business activities
and usually include cash flows from income statement items. Operating activities usually involve producing, buying
and selling goods and rendering services.
6.4.1
Importance of Cash Flow from Operating Activities
The generation of cash flow from operations is perhaps the best and most important way to generate cash. The
businesses need to have sufficient cash flows from operations to manage their working capital requirements, in
repayment of loans, for payment of dividends and in making new investments without any outsources financing. A
few periods of negative operating cash flows may not be a cause of concern as it could be possible that business is
purposely increasing its receivables or inventories to expand the business operations. However, if this negative
operating cash flow comes as a surprise to management, it should have rung warning bells.
6.5
Calculation of Cash Flow from Operating Activities
There are two ways of preparing this section.
the direct method and
the indirect method
Businesses may choose either of the two methods as both are simply two routes to the same destination. Both are
aimed at calculating cash from the income statement items. The difference lies in using the different procedures to
arrive at the net cash flows.
6.5.1
Cash from Operating Activities in Direct Method
Rather than starting with a reported operating profit, the direct method analyses different income statement
items and calculates the total cash flow created by each of these items. This method is however not tested in
CIE exams.
Chapter 6
79
6.5.2
Statements of Cash Flows
Cash from Operating Activities in Indirect Method
The indirect method is so called because it does not directly show cash receipts and cash payments rather it
shows adjustments to operating incomes for converting it to operating cash flows.
If all incomes of a business were cash incomes (no credit sales and no accrued or pre-received income), and if
the business made instant payment in cash for all of its expenses, then profit for the year (profit attributable to
equity holders) would equal the operating cash flow. However since some incomes and expenses shown in the
income statements are not dealt with in cash at the same time so they create difference between profit and
cash figures. Indirect approach to calculate cash flow from operation helps to eliminate differences between
operating profits with operating cash flows.
The indirect method uses operating profit as a starting point and then shows the adjustments to operating profit
as under
reversal entries for all income and expense that do not bring a change in cash balance e.g. add back the
amount of depreciation and amortisation expenses, since these expenses had reduced profits but did not
affect the cash balance
Profit on sale of non-current assets is subtracted from operating profit, since the entire sales proceeds is
included as investing activities and
In addition if there is timing difference between occurrence and cash receipt/payment of different income
statement items then changes in trade receivables, trade payables, prepayments or other payables
(accruals) are shown in operating section of statement of cash flows to account for this timing difference.
The operating section of the statement of cash flows under the indirect method would appear as follows:
Operating profit (Profit before interest and tax)
Add
Depreciation charge for the year
Add
Amortization of goodwill, patents or intangible assets
Add
Loss on sale of non-current assets
Less
Profit on sale of non-current assets
Less
Interest paid
Less
Taxes paid on income (usually corporation tax)
Add
Decrease in inventories/receivables
Less
Increase in inventories/receivables
Add
Increase in trade payables
Less
Decrease in trade payables
Net cash flow from operating activities
$
xx xxx
xx xxx
xx xxx
xx xxx
(x xxx)
(x xxx)
(x xx x)
xx xxx
(x xxx)
xx xxx
(x xxx)
xx xxx
This may be surprising that the operating section looks strange because the some signs are reversed; for
example, depreciation is an expense, but it is added back. This is due to the reason that the operating activities
section starts with "net operating income” from the income statement and then is adjusted by removing all
items not involving an actual cash flow.
A brief explanation of treatment of various items given in operating section is given below.
Depreciation and Amortization
Depreciation, as a non-cash expense and has already been subtracted from incomes so its effects are being
removed by adding it back in operating profit.
Profit (loss) on sale of non-current assets
Profit on disposal of non-current assets though increases both cash and net income, but is related to investing
activities (as it is part of the sales price of non-current assets). In order to remove it from the operating section
Chapter 6
80
Statements of Cash Flows
it has to be subtracted. On the other hand, a loss on disposal would be added. Profit or loss on sale of noncurrent assets may be computed as follows.
=
Loss on disposal
Sale value of asset
<
Book value of asset
OR
Profit on disposal
=
Sale value of asset

Book value of asset
Changes in Trade Receivable
If trade receivables increase during the period then the increase is subtracted from operating profit because it
represents uncollected sales included in the calculation of profits. This increase represents that part of sales
that increased income but not cash and so it is subtracted from operating profit.
Conversely decrease in trade receivables means that customers have paid off some amounts and so should be
treated as operating cash inflow.
Changes in Inventories
An increase in inventory balance indicates that more cash has been spent to purchase more goods so is
subtracted in operating section.
A decrease in inventory would be added to operating profit as shows cash released from sale of inventory or
less cash is expended to buy the inventory.
Changes in Trade payables
An increase in trade payables is shown as a cash inflow since it indicates that less cash was paid to trade payables.
This may also indicate delayed payments to trade payables which can lead to difficulties with the suppliers.
A decrease in trade payables is shown as a cash outflow, because more cash was paid in order to settle amounts
owing to trade payables.
Income Tax paid
The amount of tax is shown as cash outflow in operating section and is calculated as follows:
Tax paid
=
income statement
tax expense
Tax payable
+
at satrt
−
Tax payable at
end
Note
In the absence of tax amount charged in current year’s income statement then last year tax is shown as cash outflow
in this section. This is so as usually taxes are not paid until a few months after the start of the following year and would
affect cash flow of the following year so should not be shown as cash outflow of current year.
Effects of Changes in Working Capital items on Cash flow
Figure 1
Increase in
inventories
Increase in other
receivables
Increase in trade
receivables
Decrease in trade
payables
Cash
Outflows
Decrease in other
payables
Chapter 6
81
Statements of Cash Flows
Figure 2
Decrease in
inventories
Decrease in trade
receivables
Increase in trade
payables
Decrease in other
receivables
Cash
Inflows
Increase in other
payables
6.6
Calculation of Operating Profit
As mentioned earlier that the starting point under this method is operating profit i.e. profit before interest and tax.
This profit figure may be derived from income statement. However sometimes, the income statement or operating
profit for the year may not be available.
If operating profit is not given then it may be worked out from the difference in retained profits balance of start and
end of the period. Then in this difference the following items would be added back to arrive at the amount of
operating profit (profit before interest and tax)
Transfer to reserves
Dividends
Tax charge
Interest expense
If there were interest received then it would be deducted for the purpose.
6.7
Investing Activities
This is the second section of the statement of cash flows reports the investing activities of the business. It includes
amount spent by the business on acquiring new physical non-current assets such as machines and equipment and
the amount invested in shares, debentures, etc. of different other businesses.
Usually on net basis businesses are paying cash on investing activities, because cash is used to buy new non-current assets
or to make new investment in other businesses. However, when a company sells a non-current asset or reduces its longterm investment in another business, the transaction is considered as "investing cash inflow".
Cash from investing activities is calculated by including:
Inflows from:
➢
➢
➢
➢
➢
➢
➢
➢
Cash receipts from sale of non-current assets
Cash receipts from disposal of investments (excluding cash equivalents)
Receipt of principal amount of loans given to other entities
Sale of a business segment
Interest/Dividends received
$
xx xxx
xx xxx
xx xxx
xx xxx
xx xxx
Outflows from:
Cash payments to purchase or replace non-current assets
Loans to other entities (including suppliers or customers)
Cash payments to acquire equity or debt investments (other than cash equivalents)
Net cash flow from investing activities
(x xxx)
(x xxx)
(x xxx)
xx xxx
The cash flows from investing and operating activities are shown separately as the former have an indirect
relationship to the main, ongoing operation of the business as they represent the investment in capital expenditures
which are expected to generate future incomes and cash flows.
Investing activities section helps to determine at one glance that how cash flow from operations is being used to
"grow" the business. A lack of investing activities i.e. few purchases of new non-current assets may indicate stagnant
growth or a diversion of funds away from the business.
Chapter 6
82
6.8
Statements of Cash Flows
Financing Activities
The last section of the statement of cash flows deals with activities that are related to financing structure and
composition of the business. The statement of cash flows should explain how a business is growing and the financial
strategies employed by the business.
This section shows that how much cash the business has paid or received on account of transactions affecting equity
and debt of the business. This is determined by finding out the difference between ordinary capital and non-current
liabilities at the end of last and current year.
For example, increase in ordinary share capital by $1 million will be reported as cash inflow in the financing activities
section. On the other hand decrease in long term loans will appear as cash outflow showing that cash was used to
repay the loan. Dividends paid also appear as cash outflow as represents use of cash. Likewise if the company
redeems or purchases some of its shares, the amount will appear as cash outflow since cash was used.
Cash from financing activities is calculated by including:
Inflows from:
➢
➢
➢
$
xx xxx
xx xxx
xx xxx
Cash proceeds from issue of shares or other equity instruments
Cash proceeds from issue of debt instruments (new borrowings)
Partner/owner capital contributions (applies to sole proprietorship and partnership)
Outflows from:
➢
➢
➢
➢
(x xxx)
(x xxx)
(x xxx)
(x xxx)
xx xxx
Cash payments to repay amounts (loans) borrowed and finance lease liabilities
Payments for the repurchase/ redemption of shares
Partner/owner withdrawals (applies to sole proprietorship and partnership)
Dividends paid or returns on capital
Net cash flow from financing activities
Investing and financing transactions not involving any cash movement are not included in statement of cash flows.
Examples include revaluation of non-current assets, bonus issue, conversion of loans into shares etc.
6.9
Cash Flow at a Glance
The statement of cash flows concludes with the amount of change in overall cash balance caused by all of the above
three activities. This means the cash and cash equivalents at year-end may be determined by adding cash and cash
equivalents at year start to the net cash flow generated during the period. Though we may also determine net cash
flow by finding out the difference between cash and cash equivalents at year start and at year end, however this
does not culminate the need for preparing a statement of cash flows as it is not the net cash flow but the reasons
for changes in cash flows which are reported in the statement.
Name of Company
Statement of cash flows For the year ended - - - - - - - - - - - - - - - - - Cash flows from Operating activities
Operating profit (profit before interest and tax)
Add Depreciation charge for the year
Add Amortization of goodwill, patents or intangible assets
Add Loss on sale of non-current assets
Less Profit on sale of non-current assets
Less Interest paid
Less Taxes paid on income (usually corporation tax)
Operating profit before working capital changes
Operating profit before working capital changes
Add Decrease in inventories, receivables
Less Increase in inventories, receivables
Add Increase in payables
Less Decrease in payables
Net cash from operating activities
$
xx xxx
xx xxx
xx xxx
(x xxx)
(x xxx)
(x xxx)
xx xxx
(x xxx)
xx xxx
(x xxx)
$
xx xxx
(x xx x)
xx xxx
xx xxx
(x xxx)
xx xxx
Chapter 6
83
Statements of Cash Flows
Cash flows from Investing Activities
Cash receipts from disposal of non-current assets
Cash receipts from sale of investments (other than cash equivalents)
Interest and dividends received
Cash payments to acquire non-current assets
Cash payments to acquire investments (other than cash equivalents)
Net cash flow from investing activities
Cash flows from Financing Activities
Cash receipts from issue of shares or other equity and debt instruments
Cash payments to repay amounts borrowed & finance lease liabilities
Payments for the repurchase/ redemption of shares
Dividends paid or returns of capital
Net cash flow from financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at year start
Cash and cash equivalents at year-end
xx xxx
xx xxx
xx xxx
(x xxx)
(x xxx)
xx xxx
xx xxx
(x xxx)
(x xxx)
(x xxx)
xx xxx
xx xxx
xx xxx
xx xxx
EXAMPLE
The following information relates to the last two years for Malcolm Trading
Co. Statement of financial positions
As at 30 June
20X4
Non-Current Assets
$000 $000
Land and Buildings
2 200 - - Plant and Equipment
645 305
Motor Vehicles
505 155
3 350 460
Current assets
Inventory
530
Trade receivables
380
Other receivables (prepayments)
10
Bank balance
410 1 330
Less Current Liabilities
Trade payables
184
Taxation
162
Interest payable
10 (356)
Non-current Liabilities
8% debentures
$000
2 200
340
350
2 890
974
3 864
$000
2 000
590
485
3 075
20X3
$000
300
280
165
745
290
215
15
185
705
176
108
8
(292)
(250)
3 614
$000
1 700
310
320
2 330
413
2 743
(200)
2 543
Equity
Ordinary share capital ($1 shares)
2 300
Share premium
250
Revaluation Reserves
500
Retained profits
564
Additional Information:
(i)
Income Statements (Extracts)
For the year ending 30 September
Operating profit
Interest
Profit before tax
Tax
Profit attributable to equity shareholders
3 614
20X4
$000
419
(20)
399
(162)
237
2 000
100
−
443
2 543
20X3
$000
387
(16)
371
(108)
263
Chapter 6
84
(ii)
Statements of Cash Flows
Statement of Changes in Equity
For the year ended 30 June 20X4
Balance at start of year
New issue of share capital
Total comprehensive income for the year
Dividends paid
Balance at end of the year
Share
capital
$000
2 000
300
--------2 300
Share
Revaluation Retained
Premium
Reserve
Earnings
$000
$000
$000
100
----443
150
------------500
237
--------(116)
250
500
564
Total
Equity
$000
2 543
450
737
(116)
3 614
A new issue of debentures was made on 1 July 20X3.
300 000 ordinary shares of $1 were issued on 1 July 20X3 at a premium of $0.50 per share.
Freehold premises were revalued on 1 July 20X3.
Motor vehicles which cost $45 000 and on which depreciation of $25 000 has been accumulated, was sold
for $19 000. However, there was no disposal of plant during the year.
REQUIRED
Prepare a statement to reconcile operating profit with cash from operations for the year ended 30 June
20X4.
Prepare a Statement of cash flows in accordance with IAS 7 for the year ended at 30 June 20X4.
SOLUTION
Malcolm Trading Co
Statement of cash flows for the year ended 30 June20X4
Operating activities
Profit before interest and income taxes
Depreciation on plant and equipment ($305 000 − $280 000)
Depreciation on motor vehicles [$155 000 − ($165 000 − $25 000)]
Loss on sale of plant [($45 000 − $25 000) − $19 000]
Interest paid ($20 000 + $8 000 − $10 000) [note (i)]
Corporation tax paid [note (ii)]
Operating profit before working capital changes
Increase in Inventory ($530 000 − $290 000)
Increase in Debtors/Trade receivables ($380 000 − $215 000)
Decrease in Other receivables (prepayments) ($15 000 − $10 000)
Increase in Trade creditors/ Trade payables ($184 000 − $176 000)
Net cash flow from operating activities
Investing activities
Payments to acquire motor vehicles [$505 000−($485 000−$45 000)] [note (iv)]
Payments to acquire plant and equipment ($645 000 − $590 000)[note (v)]
Receipts from sale of motor vehicles
Net cash flow from investing activities
Financing activities
Receipts from issue of debentures [($250 000 − $200 000)
Receipts from issue of shares [(2 300 000−2 000 000)+ (250 000−100
000)] Dividends paid during year [note (vi)]
Net cash flow from financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at year start
Cash and cash equivalents at year end
$000
25
15
1
(18)
(108)
(240)
(165)
5
8
$000
419
(85)
334
(392)
(58)
(65)
(55)
19
(101)
50
450
(116)
384
225
185
410
Chapter 6
85
Statements of Cash Flows
Notes
As debentures interest was accrued at the end of both years so to determine the amount of interest paid
is adjusted to interest expense figure shown in the income statement.
As statement of financial position of the current year shows same amount of tax as was included in the
income statement, so it entails the only amount paid for tax relates to last year.
As one vehicle costing $45 000 was sold during the year so it was subtracted from the cost of vehicles at
year start and then the remaining value was compared with the cost of vehicles at year end to find out cost
of new purchase(if any) of vehicles.
Revaluation of freehold premises is a non-cash transaction and is credited to revaluation reserves as
evidenced from the increase in revaluation reserves in the statement of financial position.
As there was no plant disposals during the year so simply cost of plant at year start was compared with
the cost of plant at year end to find out cost of new purchase(if any) of plant and equipment items.
As there was no proposed dividend included in the current liabilities section so it means that same
amount is paid for dividends as shown in the income statement of current year.
6.10
Uses of a Statement of cash flows
Statement of cash flows is intended to show information that is not found in Income Statement and Statement of
financial position. It is intended to fill in gaps in the available published information, between opening and closing
statement of financial positions. In simple words a statement of cash flows is repackaging of the summary of items
included in the cash book for the same period. Though a statement of cash flows shows only historic data, it normally
serves the following purposes:
It provides additional information not contained in other financial statements by creating a link between
the current and last year statement of financial positions.
The statement shows the ability of a business to generate cash from internal and external sources.
It provides relevant and useful information to users of financial statements to assist them in
understanding the cash flow implications of the year’s activities.
It reconciles profitability and liquidity by explaining the difference between the operating profit and cash
generated from operations.
It provides information relating to cash flows from investing and financing transactions.
It helps to ascertain the required amount of funds in meeting the expansion requirements of the business.
It also helps the lenders, investors and trade payables to evaluate the business’ ability in meeting its
financial obligations including loan interest.
It assesses a company’s ability to pay required amount of taxes and maintain dividends at a reasonable level.
It can be used as the basis for budgeting and business-planning as it helps to assess the amounts and
timings of future cash flows.
It shows sources and uses of cash in an objective manner whereas reported operating profit is heavily
influenced by the accounting practices employed by the business.
6.11
Limitations of a Statement of cash flows
Though a statement of cash flows is of enormous help to accounting users, yet, it has some limitations. As it is
prepared by using the information included in the financial statements therefore the limitations of financial
statements also apply to the statement of cash flows.
It shows historical transactions and does not reveal future flows as it is not possible to determine that how much
cash will be available in meeting future obligations. A budgeted statement of cash flows, therefore, would be more
useful in order to determine the liquidity position of a business and its ability to pay its debts.
If cash flow from operating activities is prepared from indirect method then it would not show separate changes in
cash flows arising from different items of income statement.
6.12
Users of Statement of cash flows
The following people and groups may be interested in statement of cash flows:
Chapter 6
6.13
86
Statements of Cash Flows
User Group
Area of interest
Potential lenders or trade
payables
They want to evaluate a business’ ability to generate cash for
meeting its financial obligations as and when they fall due.
Potential shareholders
They need to determine financial strengths of the company and
its ability to maintain a reasonable dividend rate.
Potential employees or
contractors
They need to determine the ability of the business in paying
them salaries and compensation
users of financial
statements
They want to have relevant and useful information to
understand the cash flow implications of the year’s activities.
Tax authorities
It assesses a company’s ability for making the required tax
payments.
Accounting personnel
They want to assess the entity’s ability to cover payroll and
other immediate expenses.
Disclosure of Non Cash Activities
Under IAS 7, non-cash operating items are written backwards in the operating section of the statement of cash flows.
The non-cash investing and financing items are not incorporated in the statement of cash flows and are disclosed in
footnotes to the financial statements.
Purchase of an asset on lease basis
Conversion of loans to equity capital
Exchange of non-cash assets or liabilities for other non-cash items
Issue of shares in payment for assets
Other non-cash events include bonus issues, revaluation of non-current assets and transfer of retained earnings to
reserves. These items are generally reported in the statement of changes in equity.
6.14
Statement of cash flows for Businesses Other Than Limited Companies
Unincorporated businesses like sole proprietorships and partnerships are not legally required to prepare this
statement on regular basis. However if they desire, they may prepare the statement as it may benefit them in a
number of ways as discussed earlier. The statement of cash flows for unincorporated businesses may be prepared
in any format or layout at any time interval which suits the requirements of the businesses.
Chapter 6
87
Statements of Cash Flows
REVIEW QUESTIONS
6.1
The Statements of financial position for the last two years for Modern Enterprises are shown below.
As at 31 December
Non-Current Assets (see note)
Current assets
Inventory
Trade receivables
Bank balance
Modern Enterprises
Statement of financial positions
20X4
$000
$000
$000
3 200
240
2 960
$000
3 400
20X5
$000
260
320
260
190
770
Less Current Liabilities
Trade payables
Taxation
Net current assets
200
70
Non-current Liabilities
10% debentures
$000
3 140
340
230
210
780
232
68
(270)
(300)
500
3 460
480
3 620
100
3 360
120
3 500
2 500
200
150
510
3 360
2 700
300
200
300
3 500
Equity
Ordinary share capital ($1 each)
Share premium account
General Reserves
Retained profits
Additional Information:
Operating profit for the year amounting to $340 000.
Current year depreciation charge on non-current assets amounting to $140 000.
Some new non-current assets were purchased for $400 000 during the year whereas some assets with a
net book value of $80 000 were sold for $70 000.
A new issue of debentures was made on 1 January 20X5.
Interest expenses charged to Income Statement amounting to $12 000.
Company paid ordinary share dividends of $420 000 during the year.
200 000 ordinary shares of $1 were issued on 1 July 20X5 at $1.50 per share.
REQUIRED
Prepare a statement of cash flows in accordance with IAS 7 for the year ending 31 December 20X5.
6.2
The statements of financial positions of the last two years for National Limited are as follows
As at 30 June
Non-Current Assets (see note)
National Limited
Statement of financial positions
20X2
$000
$000
$000
4 600
520
4 080
$000
5 200
20X3
$000
740
$000
4 460
Chapter 6
88
Current assets
Inventory
Trade receivables
Bank balance
$000
Less Current Liabilities
Trade payables
Taxation
170
70
Statements of Cash Flows
$000
450
370
190
1 010
$000
(240)
770
4 850
Non-current Liabilities:
10% loan stock
$000
210
90
$000
530
350
320
1 200
$000
(300)
900
5 360
(120)
4 730
(150)
5 210
Equity
Ordinary share capital ($1 each)
Share premium account
General Reserves
Retained profits
3 500
400
300
530
3 750
450
400
610
4 730
5 210
Additional Information:
Operating profit for the year amounting to $595 000.
Current year depreciation charge on Non-Current Assets amounting to $400 000.
Some new non-current assets were purchased for $1 100 000 during the year whereas some assets with a
net book value of $320 000 were sold for $330 000.
A new issue of loan stock was made on 1 July 20X2.
Interest expenses charged to Income Statement amounting to $15 000.
Company paid ordinary dividends of $310 000 during the year.
250 000 ordinary shares of $1 were issued in March 20X3 at a premium of $0.20 each.
REQUIRED
Prepare a statement of cash flows in accordance with IAS 7 for the year ending 30 June 20X3.
6.3
The statement of changes in equity for the current year and Statement of financial positions for the last two years
for Equip Co are shown below.
Statement of Changes in Equity
For the year ended 30 June 20X8
Ordinary
Share
Revaluation
capital
premium
reserves
$000
$000
$000
Balance at start of year
2 000
100
Nil
Issue of shares
200
100
Revaluation surplus on non-current assets
674
Current year profit
Dividends paid
____
___
___
Balance at end of the year
2 200
200
674
As at 30 June
Non-Current Assets (see note)
Equip Co
Statement of financial positions
20X8
$000
$000
$000
3 205
419
2 786
$000
2 868
Retained
Earnings
$000
335
242
(106)
471
20X7
$000
621
Total
$000
2 435
300
674
242
(106)
3 545
$000
2 247
Chapter 6
89
Current assets
Inventory
Trade receivables
Bank balance
Less Current Liabilities
Trade payables
Taxation
Interest payable
$000
164
122
15
Statements of Cash Flows
$000
440
310
560
1 310
(301)
Non-current Liabilities
12% debentures
$000
1 009
3 795
$000
172
148
12
$000
260
185
275
720
$000
(332)
388
2 635
250
3 545
200
2 435
2 200
200
674
471
3 545
2 000
100
−
335
2 435
Equity
Ordinary share capital ($1 each)
Share premium account
Revaluation Reserves
Retained earnings
Additional Information:
(i)
Non-Current Assets Schedule
Cost
At 1 July 20X7
Additions
Disposals
Revaluation surplus
At 30 June 20X8
Depreciation
At 1 July 20X7
Current year charge
Disposals
Revaluation adjustment
At 30 June 20X8
Net book value at 30 June 20X8
(ii)
Freehold
Premises
$000
1 800
−
−
300
2 100
Fixtures and
Fittings
$000
610
45
(30)
−
625
Motor
Vehicles
$000
458
48
(26)
−
480
330
44
165
80
(16)
−
229
396
126
74
(10)
−
190
290
(374)
Nil
2 100
Total
$000
2 868
93
(56)
300
3 205
621
198
(26)
(374)
419
2 786
Proceeds from the sales of non-current assets were:
$000
Fixtures and Fittings
17
Motor vehicles
11
A new issue of debentures was made on 1 January 20X8.
Operating profit for the year amounting to $391 000.
Interest expenses charged to Income Statement amounting to $27 000.
200 000 ordinary shares of $1 were issued on 1 July 20X7 at a premium of $0.50 per share.
Freehold premises were revalued on 30 June 20X8
REQUIRED
Prepare a statement of cash flows in accordance with IAS 7 for the year ending 30 June 20X8.
6.4
The statement of changes in equity for the current year and statement of financial positions of the last two years
for Joyce Limited are as follows
Chapter 6
90
Balance at start of year
Issue of shares
Revaluation surplus
Current year profit
Transfer to general reserves
Dividends paid
Balance at end of the year
as at 31 March
Statements of Cash Flows
Statement of Changes in Equity
For the year ending 31 March 20X6
Ordinary
Share
Revaluation General
capital
premium
reserves
Reserves
$000
$000
$000
$000
1 800
210
Nil
230
200
50
574
__ __
2 000
___
260
Non-Current Assets see note
Current assets
Inventory
Trade receivables
Bank balance
Current Liabilities
Trade payables
Corporation Taxation
Interest payable
528
(120)
(223)
572
120
___
350
_ __
574
Statement of financial positions
20X5
$000
$000
Retained
Earnings
$000
387
$000
2 794
$000
20X6
$000
282
153
95
530
319
84
14
(417)
Non-current Liabilities
10% debentures
Total
$000
2 627
250
574
528
----(223)
3 756
$000
3 312
352
293
313
958
113
2 907
332
98
4
(434)
(280)
2 627
524
3 836
(80)
3 756
Equity
Share capital (fully paid $1 shares)
Share premium account
General reserves
Revaluation Reserves
Retained profits
Notes
(i)
1 800
210
230
−
387
2 000
260
350
574
572
2 397
3 756
Non-Current Assets Schedule
Cost at 1 April 20X5
Additions
Disposals
Revaluation surplus
Cost at 31 March 20X6
Depreciation at 1 April 20X5
Current year charge
Disposals
Revaluation adjustment
Depreciation at 31 March 20X6
Net book value at 31 March 20X6
Land and
Buildings
$000
2 500
−
−
200
2 700
Plant and
Equipment
$000
590
75
(45)
−
620
Motor
Vehicles
$000
455
79
(34)
−
500
$000
3 545
154
(79)
200
3 820
330
44
225
62
(26)
−
261
359
196
75
(24)
−
247
253
751
181
(50)
(374)
508
3 312
(374)
Nil
2 700
Total
Chapter 6
91
Statements of Cash Flows
Extract from income statement for the year ending 31 March 20X6 shows
$000
644
(18)
(98)
528
Operating profit
Interest
Tax
Profit attributable to equity holders
(iii)
Cash received from the sales of non-current assets were:
Plant and equipment
Motor vehicles
$200 000 of debentures were redeemed at par on 1 October 20X5.
200 000 ordinary shares of $1 were issued on 1 July 20X7 at $1.25 each.
Land and buildings were revalued on 31 March 20X6.
$000
15
16
REQUIRED
Prepare a statement of cash flows in accordance with IAS 7 for the year ending 31 March 20X6.
6.5
The summarized statements of financial position along with some additional information of Warrick Ltd as at 30
September 20X2 and 30 September 20X3 are as follows:
At 30 September
20X2
Cost Aggregate Book
Depn.
Value
$000
$000
$000
1 700
1 700
285
124
161
456
132
324
2 441
256
2 185
150
___
150
2 591
256
2 335
168
6
79
224
15
106
15
518
253
10% Investments at cost
Current assets
Inventory
Trade receivables
Provision for doubtful debts
Other receivables (prepayments)
Balance at bank
Cash in hand
158
236
(12)
Non-current assets
Freehold premises
Fixtures and fittings
Plant and Equipment
265
2 600
120
2 480
Current Liabilities
Trade payables
Interest due
Tax payable
At 30 September 20X3
Cost Aggregate Book
Depn.
Value
$000
$000
$000
2 150
2 150
285
152
133
608
182
426
3 043
334
2 709
_210
____
210
3 253
334
2 919
171
220
(11)
254
7
97
209
20
210
26
636
358
Non-Current Liabilities: 10% Debentures
278
3 197
140
3 057
Equity
2 000
220
-50
210
2 480
Ordinary share capital
Share premium
Revaluation reserve
General Reserves
Retained profits
2 200
220
250
80
307
3 057
Chapter 6
92
Statements of Cash Flows
Additional information
Operating profit for the year ending 30 September 20X3 was $425 000.
Final dividend paid in respect of previous year was $133 000 whereas interim dividend paid during the
current year was $75 000. Directors of the company also proposed final dividend of $142 000 for the current
year.
Interest income credited to income statement and interest expense charged to income statement for the
year were $21 000 and $14 000 respectively.
During the year company issued 200 000 bonus shares by using revaluation reserves.
No fixtures were disposed of or bought during the year.
There was also no disposal of plant and equipment during the year.
The increase in investment and the new debentures issue were made on 1 October 20X2.
REQUIRED
Prepare a statement of cash flows in accordance with IAS 7 for the year ending 30 September 20X3.
6.6
The following information relates to Bradshaw Limited for the year ended 31 December 20X4 & 20X5.
At 31 December
20X4
At 31 December 20X5
Cost
Depn.
NBV
Cost
Depn. NBV
Non-current assets
$000
$000
$000
$000
$000
$000
Goodwill
200
120
200
100
Freehold Land and buildings
1 400
----1 400
2 000
40
1 960
Fixtures and fittings
325
138
187
385
156
229
Motor vehicles
330
126
204
340
148
192
Investments
125
____
125
_185
____
185
2 380
254
2 036
3 010
344
2 666
Current assets
Inventory
215
296
Trade receivables
192
225
Provision for doubtful debts
(14)
178
(18)
207
Bank balance
99
−
Cash balance
5
26
398
628
Current Liabilities
Trade payables
169
149
Other payables (accruals)
12
15
Tax payable
82
65
Bank balance
77
340
58
−
229
399
2 094
3 065
Non-Current Liabilities: 10% Debentures
100
140
1 994
2 925
Equity
Ordinary share capital
1 600
1 800
Share premium
120
170
Revaluation reserve
--600
General Reserves
70
90
Retained profits
204
1 994
265
2 925
Additional information
Operating profit for the year ending 31 December 20X5 was $240 000.
Final dividend paid for the year 20X4 was $64 000 whereas interim dividend paid during the year 20X5
was 36 000. Directors of the company also proposed final dividend of $76 000 for the year 20X5.
Interest income credited to income statement and interest expense charged to income statement for the
year were $20 000 and $14 000 respectively.
Corporation tax provided for against current year profit was $65 000.
Chapter 6
93
Statements of Cash Flows
There was also no disposal of fixtures during the year.
Motor vehicles costing $40 000, having a book value of $15 000 were sold for $18 000.
Freehold land and buildings were revalued on 1 January 20X5.
The new debentures issue was also made on 1 January 20X5.
REQUIRED
Prepare a statement of cash flows in accordance with IAS 7 for the year ending 31 December 20X5.
6.7
The following information is related for Bravo Pvt. Limited as at 30 June 20X7 and 20X8.
At 30 June 20X7
At 30 June 20X8
Cost
Depn.
NBV
Cost
Depn.
NBV
Non-current assets
$000
$000
$000
$000 $000
$000
Freehold Premises
2 200
220
1 980
2 200
264
1 936
Fixtures and fittings
450
220
230
490
255
235
670
255
415
690
275
415
Plant and equipment
_____
____
300
____
____
200
Investments in ordinary shares
3 320
695
2 925
3 380
794
2 786
At 30 June 20X7
At 30 June 20X8
Current assets
$000
$000
$000
$000 $000
$000
Inventory
296
354
Trade receivables
220
250
(11)
209
(15)
235
Provision for doubtful
145
466
debts Bank balance
650
1 055
Current Liabilities
Trade payables
319
276
Other payables (accruals)
14
18
114
(447)
203
102
(396)
659
Tax payable
3 128
3 445
Non-Current Liabilities
(300)
(100)
10% Convertible loan stock
2 828
3 345
Equity
Ordinary share capital
1 800
2 050
Share premium
300
500
General Reserves
220
260
508
2 828
535
3 345
Retained profits
Additional information
Dividends paid during the year were $166 000 whereas $102 000 is proposed for the current year.
Plant and equipment which originally cost $50 000 was sold at a loss of $5 000 compared to its book
value. At the date of sale the book value was $30 000.
Some of the investment in ordinary shares was sold for $120 000.
Company earned profit after tax amounting to $233 000 for the year ended 30 June 20X8.
On 1 July 20X7 2/3 of the convertible loan stock opted to convert their stock to ordinary shares @ one
share for each $2 of loan stock held.
REQUIRED
Calculate operating profit for the year ended at 30 June 20X8.
Prepare a statement of cash flows in accordance with IAS 7 for the year ending 30 June 20X8.
6.8
The statements of financial positions along with some additional information of Glazing Pvt. Ltd as at 30
September 20X4 and 30 September 20X5 are as follows:
Chapter 6
94
At 30 September 20X4
Cost
Aggregate Book
Depn.
Value
$000
$000
$000
160
2 000
400
1 600
670
230
440
485
165
320
3 155
795
2 520
Current assets
Inventory
Trade receivables
Provision for doubtful debts
Other receivables (prepayments)
Balance at bank
310
250
(10)
320
7
108
240
15
200
765
(435)
Non-current assets
Goodwill
Freehold premises
Plant and Equipment
Motor Vehicles
330
2 850
(620)
2 230
Current Liabilities
Trade payables
Interest due
Tax payable
Non-Current Liabilities:10% Debentures
Statements of Cash Flows
At 30 September 20X5
Aggregat
Cost
e
Book
Depn.
Value
$000
$000
$000
120
2 000
50
1 950
725
245
480
505
155
350
3 230
450
2 900
354
275
(11)
335
8
112
264
20
317
955
(455)
500
3 400
(140)
3 260
Equity
1 800
Ordinary share capital
2 000
250
Share premium
350
--Revaluation reserve
400
110
General Reserves
130
70
2 230
Retained profits
380
3 260
Additional Information
Glazing Ltd earned profit after tax amounting to $492 000 for the year ended 30 September 20X5.
Motor vehicles which cost $60 000 and on which depreciation of $45 000 has been accumulated, was sold
for $17 000. However, there was no disposal of plant during the year.
Glazing Ltd paid interim ordinary dividend during the current year amounting to $48 000. Company also
proposed $134 000 as final dividends for the current year whereas the proposed final dividends for the last
year were $114 000.
Freehold premises were revalued on 1 October 20X4.
REQUIRED
Calculate operating profit for the year ending at 30 September 20X5.
Prepare a statement of cash flows for the year ending 30 September 20X5.
6.9
The financial statements of the last year for Joyce Limited are as follows
Income Statement (Extract)
For the year ending 31 March 20X6
Operating profit
Interest
Profit before tax
Tax
Profit attributable to equity holders
$000
644
(18)
626
(98)
528
Chapter 6
95
Statements of Cash Flows
Statement of financial position as at 31 March 20X5
$000
Non-Current Assets see note
Current assets
Inventory
Trade receivables
Bank balance
Less Current Liabilities
Trade payables
Corporation Taxation
Interest payable
$000
282
153
95
530
319
84
14
(417)
Non-current Liabilities: 10% debentures
$000
2 794
113
2 907
(280)
2 627
Equity
Ordinary share capital (fully paid $1 shares)
Share premium account
General reserves
Revaluation Reserves
Retained profits
1 800
210
230
−
387
2 627
Joyce Limited
Statement of cash flows for the year ended 31 March 20X6
$000
Operating profit
Depreciation on land and buildings
Depreciation on plant and equipment
Depreciation on motor vehicles
Loss on fixtures disposal
Profit on vehicle disposal
Debenture interest paid
Corporation tax paid
Increase in Inventory
Increase in Trade receivables
Increase in Trade payables
Net cash from operating activities
Cash flows from investing activities
Payments to purchase non-current assets
Proceeds from sales of Plant and equipment
Proceeds from sales of vehicles
Cash flows from financing activities
Dividends paid during the year
Receipts from issue of shares
Payment for redemption of debentures (at par)
Net increase in cash and cash equivalents
Cash and cash equivalents at year start
Cash and cash equivalents at year end
Additional Information
(i)
Cash received from the sales of non-current assets were:
Plant and equipment
Motor vehicles
200 000 ordinary shares of $1 were issued on 1 July 20X5 at $1.25 each.
During the year company transferred $120 000 to general reserves.
44
62
75
4
(6)
(28)
(84)
(70)
(140)
13
(154)
15
16
(223)
250
(200)
$000
15
16
$000
644
(197)
514
(123)
(173)
218
95
313
Chapter 6
(iv)
96
Statements of Cash Flows
Non-Current Assets Schedule
Cost at 1 April 20X5
Additions
Disposals
Revaluation surplus
Cost at 31 March 20X6
Depreciation at 1 April 20X5
Current year charge
Disposals
Revaluation adjustment
Depreciation at 31 March 20X6
Net book value at 31 March 20X6
Land and
Buildings
$000
2 500
−
−
200
2 700
Plant and
Equipment
$000
590
75
(45)
−
620
Motor
Vehicles
$000
455
79
(34)
−
500
225
62
(26)
−
261
359
196
75
(24)
330
44
(374)
Nil
2 700
−
247
253
Total
$000
3 545
154
(79)
200
3 820
751
181
(50)
(374)
508
3 312
REQUIRED
Prepare a Statement of financial position as at 31 March 20X6.
6.10
The summarized statement of financial position for the last year for Malcolm Trading Co is shown below.
Statement of financial position as at 30 June 20X3
Non-Current Assets
Freehold premises
Plant and Equipment
Motor Vehicles
Current assets
Inventory
Trade receivables
Other receivables (prepayments)
Bank balance
Less Current Liabilities
Trade payables
Taxation
Interest payable
$000
2 000
590
485
3 075
$000
300
280
165
745
290
215
15
185
705
176
108
8
(292)
Non-current Liabilities: 8% debentures
$000
1 700
310
320
2 330
413
2 743
(200)
2 543
Equity
Ordinary share capital ($1 shares)
Share premium account
Revaluation Reserves
Retained profits
2 000
100
−
443
2 543
Budgeted Income Statement (Extract)
For the year ended 30 June 20X4
Operating profit
Interest
Profit before tax
Tax
Profit attributable to equity holders
$000
419
(20)
399
(162)
237
Chapter 6
97
Statements of Cash Flows
Budgeted Statement of cash flows
For the year ended 30 June 20X4
$000
Operating profit
Depreciation on plant and equipment
Depreciation on motor vehicles
Loss on sale of vehicle
Interest paid
Corporation tax paid
Increase in Inventory
Increase in Trade receivables
Decrease in other receivables (prepayments)
Increase in trade payables
Net cash from operating activities
Cash flows from investing activities
Payments to acquire plant and equipment
Payments to acquire motor vehicles
Receipts from sale of motor vehicles
Cash flows from financing activities
Ordinary dividends paid during year
Receipts from issue of debentures
Receipts from issue of shares (@$1.50 each)
Net increase in cash and cash equivalents
Cash and cash equivalents at year start
Cash and cash equivalents at year end
25
15
1
(18)
(108)
(240)
(165)
5
8
(55)
(65)
19
(116)
50
450
$000
419
(477)
(58)
(101)
384
225
185
410
Freehold premises were revalued on 1 July 20X3 at $2 200 000.
Motor vehicles which cost $45 000 and on which depreciation of $25 000 has been accumulated, was sold
for $19 000. However, there was no disposal of plant during the year.
REQUIRED
Prepare budgeted statement of financial position for Malcolm Trading Co as at 30 June 20X4 in as much detail as
possible.
CHAPTER 6
6.1
Modern Enterprises
Statement of cash flowsfor the year ended 31 December 20X5
$000
Operating Profit
Depreciation on non-current assets
Loss on disposal of non-current assets ($80 000 − $70 000)
Debenture interest paid
Corporation tax paid
Increase in Inventory ($340 000 − $320 000)
Decrease in Trade receivables ($260 000 − $230 000)
Increase in Trade payables ($232 000 − $200 000)
Net cash from operating activities
Cash flows from investing activities
Payments to acquire non-current assets
Proceeds from sales of non-current assets
Cash flows from financing activities
140
10
(12)
(70)
(20)
30
32
(400)
70
$000
340
42
450
(330)
Dividends paid during year
Receipts from issue of shares (200 000 shares × $1.50)
Receipts from issue of debentures ($120 000 − $100 000)
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
(420)
300
20
(100)
20
190
210
Appendix 1
287
Solutions to Odd Numbered Questions
6.3
Statement of cash flows for the year ended 30 June 20X8
$000
Profit before interest and income taxes
Depreciation on freehold property
Depreciation on fixtures and fittings
Depreciation on motor vehicles
Profit on fixtures disposal [$17 000 − ($30 000 − $16 000)]
Loss on vehicle disposal [$11 000 − ($26 000 − $10 000)]
Debenture interest paid ($12 000 + $27 000 − $15 000)
Corporation tax paid
Operating profit before working capital changes
Increase in Inventory ($440 000 − $260 000)
Increase in Trade receivables ($310 000 − $185 000)
Decrease in Trade payables ($172 000 − $164 000)
Net cash from operating activities
Cash flows from investing activities
Payments to acquire tangible non-current assets
Proceeds from sales of fixtures
Proceeds from sales of vehicles
Net cash flow from investing activities
Cash flows from financing activities
Dividends paid during year
Receipts from issue of shares [200 000 shares × ($1.00 + $0.50)]
Receipts from issue of debentures ($250 000 − $200 000)
Net cash flow from financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
44
80
74
(3)
5
(24)
(148)
(180)
(125)
(8)
$000
391
28
419
(313)
106
(93)
17
11
(65)
(106)
300
50
244
285
275
560
6.5
Warrick Ltd
Statement of cash flows for the year ended 30 September 20X3
$000
Operating profit
Depreciation on fixtures and fittings ($152 000 − $124 000)
Depreciation on plant and equipment ($182 000 − $132 000)
Debenture interest paid ($14 000 + $6 000 − $7 000)
Corporation tax paid
Operating profit before working capital changes
Increase in Inventory ($171 000 − $158 000)
Decrease in Trade debtors/Trade receivables ($224 000 − $209000)
Increase in other receivables (prepayments) ($20 000 − $15 000)
Increase in Trade payables ($254 000 − $168 000)
Net cash from operating activities
Cash flows from investing activities
Interest received
Payments to acquire Plant and equipment ($608 000 − $456 000)
Increase in 10% investment ($210 000 − $150 000)
Net cash flow from investing activities
Cash flows from financing activities
Dividends paid during year ($133 000 + $75 000)
Receipts from issue of debentures ($140 000 − $120 000)
Net cash flow from financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year ($15 000 + $106 000)
Cash and cash equivalents at the end of the year ($210 000 + $26 000)
28
50
(13)
(79)
(13)
15
(5)
86
$000
425
(14)
411
83
494
21
(152)
(60)
(191)
(208)
20
(188)
115
121
236
Appendix 1
288
Solutions to Odd Numbered Questions
6.7
(a)
Calculation of operating profit for the year ended 30 June 20X8
$000
345
(10)
(102)
233
Operating profit (balancing figure)
Loan interest
Taxation
Profit attributable to equity holders
(b)
Bravo Pvt. Limited
Statement of cash flows for the year ended 30 June 20X8
$000
Operating profit
Depreciation on land and buildings ($264 000 − $220 000)
Depreciation on fixtures and fittings ($255 000 − $220 000)
Depreciation on plant [$275 000 − {$255 000 − ($50 000 − $30 000)}]
Loss on sale of plant [$18 000 − ($40 000 − $15 000)]
Profit on sale of investments [$120 000 − ($300 000 − $200 000)]
Interest paid
Corporation tax paid
Operating profit before working capital changes
Increase in Inventory ($354 000 − $296 000)
Increase in Trade receivables ($235 000 − $209 000)
Decrease in Trade payables ($319 000 − $276 000)
Increase in other payables (Other payables (accruals)) ($18 000 − $14 000)
Net cash from operating activities
Cash flows from investing activities
Payments to acquire fixtures and fittings ($490 000 − $450 000)
Payments to acquire plant and equipment [$690 000 − ($670 000 − $50 000)]
Receipts from sale of plant and equipment ($30 000 − $5 000)
Sale of investment in ordinary shares
Net cash flow from investing activities
Cash flows from financing activities
Dividends paid during year
Issue of shares [(2 050 000−(1 800 000)+ (500 000−300 000)−200 000]
Net cash flow from financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year ($5 000 − $127 000)
Cash and cash equivalents at the end of the year
$000
345
44
35
40
5
(20)
(10)
(114)
(58)
(26)
(43)
4
(20)
325
(123)
202
(40)
(70)
25
120
35
(166)
250
84
321
145
466
6.9
Joyce Ltd
Statement of financial position as at 31 March 20X6
Non-Current Assets
Current assets
Inventory ($282 000 + $70 000)
Trade receivables ($153 000 + $140 000)
Bank ($95 000 + $218 000)
Less Current Liabilities
Trade payables ($319 000 + $13 000)
Corporation Taxation
Interest payable ($18 000 + $14 000 − $28 000)
Net current assets
Non-current Liabilities
10% debentures ($280 000 − $200 000)
$000
3 820
$000
508
$000
3 312
352
293
313
958
332
98
4
(434)
524
3 836
(80)
3 756
Appendix 1
289
Solutions to Odd Numbered Questions
Equity
Share capital [$1 800 000 + (200 000 shares  $1.0)]
Share premium [$210 000 + (200 000 shares  $0.25)]
General reserves ($230 000 + $120 000)
Revaluation Reserves ($200 000 + $374 000)
Retained profits
2 000
260
350
574
572
3 756
CHAPTER 6
6.2
Operating activities
Net increase in cash
880 000
130 000
Investing activities
Cash at start
(770 000)
190 000
Financing activities
Cash at end
20 000
320 000
Operating activities
Net increase in cash
514 000
218 000
Investing activities
Cash at start
(123 000)
95 000
Financing activities
Cash at end
(173 000)
313 000
Operating activities
Net increase in cash
139 000
197 000
Investing activities
Cash at start
(132 000)
(72 000)
Financing activities
Cash at end
190 000
125 000
Operating profit
Financing activities
618 000
(342 000)
Operating activities
Net increase in cash
577 000
117 000
Investing activities
Cash at end
(118 000)
317 000
Non-Current Assets
Non-Current Liabilities
Revaluation reserves
2 890 000
250 000
500 000
Current Assets
Ordinary share capital
Retained earnings
1 330 000
2 300 000
564 000
Current Liabilities
Share premium
356 000
250 000
6.4
6.6
6.8
6.10