GRADE 12
LESSON
24
CASH FLOW STATEMENT STEP-BY-STEP
ACTIVITY 2
Let us do the cash flow step-by-step together with the
Teacher before we attempt a full activity
ACTIVITY 2.1 – The three main activities
At the beginning of the financial year, ABC Limited had R10 000 cash in the bank. During the
year they received R820 000 cash.
The receipts were made up of
Operating activities
440 000
From issue of shares
240 000
Loans raised
140 000
820 000
The following payments were made
Operating activities
276 000
Fixed assets purchased
98 000
Loans repaid
170 000
544 000
Required
Prepare a basic Cash Flow Statement and calculate the bank balance the end of the year
ANSWER
CASH FLOW STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2015
Notes
R
Cash flows from operating activities
Cash generated from operations
Interest paid
Dividends paid
Taxation paid
1
*3
*4
Cash flows from investing activities
Purchase of non-current assets
Proceeds from sale of non-current assets
Investments matured/repaid
*5
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from long-term borrowings
Payment of long-term loans
Net change in cash and cash equivalents (balancing amount)
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
2
2
2
BANK
Balance
Receipts
b/d
Balance
b/d
24 Accounting Grade 12 - CAPS
Payments
Balance
c/d
1
ACTIVITY 2.2 - NOTE I - Reconciliation between profit before taxation and
cash generated from operations
INFORMATION
Extract from the Income Statement - 2015
Sales
Cost of sales
Wages
Depreciation\
Interest on loans
Sundry expenses
Net income before tax
840 000
600 000
120 000
32 000
12 000
16 000
60 000
Extract from the Balance sheet
Inventories
Trade and other receivables (debtors)
Trade and other payables (creditors)
2015
2014
320 000
120 000
40 000
400 000
140 000
28 000
REQUIRED
Prepare Note 1 of the Cash flow statement and show how it will appear on the face of the
Cash Flow Statement.
ANSWER
NOTE 1
Reconciliation between profit before taxation and cash generated from operations
Profit before taxation
Adjustments in respect of:
Interest paid
ADD amount
Depreciation
ADD amount
Operating profit before changes in working capital
Changes in working capital
(Increase) / decrease in inventories
(Increase) / decrease in trade and other receivables
Increase / (decrease) in trade and other payables
Cash generated from operations
1.
CASH FLOW STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2015
Cash flows from operating activities
Cash generated from operations
Interest paid
1
subtract
Dividends paid
Taxation paid
Cash flows from investing activities
Purchase of non-current assets
Proceeds from sale of non-current assets
Investments matured/repaid
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from long-term borrowings
Payment of long-term loans
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
24 Accounting Grade 12 - CAPS
*3
*4
*5
2
2
2
2
ACTIVITY 2.3 - NOTE 2 - Cash and cash equivalents
INFORMATION
Extract from the financial statements on 28 February
2015
Current assets
112 400
Inventories
62 000
Trade and other receivables
32 000
Cash and cash equivalents
19 600
2014
113 200
56 000
22 000
26 100
2015
19 600
18 000
900
700
2014
26 100
25 000
500
600
Cash and cash equivalents consist of
Bank
Cash float
Petty cash
REQUIRED
Prepare Note 2 and show how it appears on the face of Cash Flow Statement
ANSWER
NOTE 2
2.
Cash & cash equivalents
Bank
Cash float
Petty cash
To calculate the net change, subtract
the amount of last year from this year
NET CHANGE
2015
2014
CASH FLOW STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2015
Notes
Cash flows from operating activities
Cash generated from operations
Interest paid
Dividends paid
Taxation paid
Cash flows from investing activities
Purchase of non-current assets
Proceeds from sale of non-current assets
Investments matured/repaid
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from long-term borrowings
Payment of long-term loans
Net change in cash and cash equivalents (balancing amount)
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
24 Accounting Grade 12 - CAPS
R
1
*3
*4
*5
2
2
2
3
ACTIVITY 2.4
Note 3 - Dividends paid
Note 4 - Taxation paid
INFORMATION
Extract from the Income Statement on 28 February 2015
Notes
R
Sales
3 200 000
Cost of sales
(2 000 000)
Gross profit
1 200 000
Operating expenses
(900 000)
Wages
800 000
Depreciation
80 000
Sundry expenses
20 000
Operating profit
300 000
Profit before interest expense
300 000
Interest expense / financing costs
(40 000)
Net profit before tax
260 000
Taxation
(122 000)
Net profit after tax for the year
138 000
Notes to the financial statements
9
Retained income
Balance last day of previous year
Net profit after tax
Dividends on ordinary shares
Paid
Recommended
Balance last day of current year
Income tax
It is not correct to say
R122 000 was paid for
income tax this year.
R12 400 from last year
has been paid this year.
R10 800 is still owed at
the end of this year.
48 000
138 000
(120 000)
(48 000)
(72 000)
66 000
Additional information
Trade and other payables
SARS (Income tax)
Shareholders for dividends
2015
10 800
72 000
REQUIRED
Prepare the following:
 Note 3: Dividends paid
 Note 4: Taxation paid
Show how these amounts will appear on the face of the
Cash flow statement
24 Accounting Grade 12 - CAPS
2014
12 400
40 000
Dividends
Dividends
Dividends
It It
is is
not
not
correct
correct
toto
say
say
It is not correct
to
say
R120
R120
000
000
was
was
paid
paid
forforfor
R120 000 was paid
dividends
dividends
this
this
year.
year.
dividends
this
year.
R40
R40
000
000
from
from
last
last
year
year
has
has
R40 000 from
last
year
has
been
been
paid
paid
this
this
year.
year.
been
paid
this
year.
R72
R72
000
000
is is
still
still
owed
atat
the
thethe
R72
000
is owed
still
owed
at
end
end
of
of
this
this
year.
year.
end of this year.
Therefore
dividends
paid
for
Therefore
dividends
paid
this
year
is
for this year is
R120 000 + R40 000
– R72 000 = R88 000
4
ANSWER
NOTE 3 - DIVIDENDS PAID
3. Dividends paid
Amounts in financial statements
Balance on last day of previous year
Balance on last day of current year
Dividends paid
Outflow always bracketed
Outflow always bracketed
Not paid -not bracketed
OR
SHAREHOLDERS FOR DIVIDENDS
NOTE 4 - TAXATION PAID
4. Taxation paid
Amounts in financial statements
Balance beginning of year (credit bal.)
Balance end of year
(credit bal.)
Taxation paid
Outflow always bracketed
Unbracked if debit balance
Bracketed if debit balance
OR
SARS (INCOME TAX)
CASH FLOW STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2015
Cash flows from operating activities
Cash generated from operations
Interest paid
1
Dividends paid
Taxation paid
*3
*4
Cash flows from investing activities
Purchase of non-current assets
Proceeds from sale of non-current assets
Investments matured/repaid
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from long-term borrowings
Payment of long-term loans
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
*5
2
2
2
Learners should choose the method they prefer best
for calculating these two amounts
24 Accounting Grade 12 - CAPS
5
ACTIVITY 2.5 NOTE 5 - INVESTING ACTIVITIES:
- Tangible assets purchased
- Investments (fixed deposits)
INFORMATION
You are provided with figures extracted from the financial statements of ABC limited.
Vehicles were sold at carrying value during the financial year for R36 000.
Extract from the Income statement
Depreciation
2015
126 000
Extract from the Notes to the financial statements
2015
Vehicles (at cost)
870 000
Accumulated depreciation
453 000
Carrying value
417 000
2014
612 000
348 000
264 000
Extract from the Balance Sheet
2015
Financial assets
Fixed deposits
2014
500 000
800 000
Investment
decreased/matured –
therefore
inflow of cash
REQUIRED
 Prepare Note 5 of the Cash flow statement
 Show how the cash flows from investing activities would appear on the face of the
Cash flow statement
Calculation of vehicles bought: METHOD 1
Use the note for tangible assets. Fill in all given information.
When calculating the unknown amount, start at the bottom and add backwards.
NOTE: Fixed assets
Vehicles
Carrying value beginning of year
Additions at cost
Disposals at carrying value
Depreciation for the year
Carrying value at end of the year
????????
Unknown amount
Add backwards
Additions at cost = assets bought during the year
24 Accounting Grade 12 - CAPS
6
Calculation of vehicles bought: METHOD 2 (not recommended)
VEHICLES
ACCUMULATED DEPRECIATION ON VEHICLES
ASSET DISPOSAL
ANSWER
NOTE 5 - TANGIBLE ASSETS PURCHASED
Land and buildings
Equipment
Vehicles
Fixed assets bought
Outflow
CASH FLOW STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2015
Notes
Cash flows from operating activities
Cash generated from operations
Interest paid
Dividends paid
Taxation paid
Cash flows from investing activities
Purchase of non-current assets
## purchased - outflow
Proceeds from sale of non-current assets### selling price - inflow
Investments matured/repaid
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from long-term borrowings
Payment of long-term loans
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
R
1
*3
*4
*5
2
2
2
## = outflow of cash (bought the assets)
### = inflow of cash (selling price received)
It is suggested that learners use method 1.
It is easy to make mistakes when using method 2 and it is also
too time consuming
24 Accounting Grade 12 - CAPS
7
ACTIVITY 2.6
Financing activities
- shares
- loans
ACTIVITY 2.6.1 – Issue of new shares and repayment of loan
INFORMATION
You are provided with figures extracted from the financial statements of ABC limited.
EQUITY AND LIABILITIES
Share capital and reserves
Ordinary share capital
Retained income
2015
640 000
80 000
2014
528 000
56 000
Non-Current Liabilities: Mortgage bond
792 000
864 000
REQUIRED
 Calculate the cash flows from financing activities
 Show how the cash flows from financing activities would appear on the face of the
Cash flow statement
ANSWER
CASH FLOW STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2015
Notes
R
Cash flows from operating activities
Cash generated from operations
Interest paid
Dividends paid
Taxation paid
Cash flows from investing activities
Purchase of non-current assets
Proceeds from sale of non-current assets
Investments matured/repaid
1
*3
*4
*5
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from long-term borrowings
Repayment of long-term loans
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
24 Accounting Grade 12 - CAPS
2
2
2
8
ACTIVITY 2.6.2 – Repurchase of shares
INFORMATION
You are provided with figures extracted from the financial statements of ABC Limited on 28
February.
Share capital and reserves
2015
2014
Ordinary share capital
4 000 000
5 600 000
(number of shares at end of year)
(250 000)
(350 000
Retained income
1 740 000
1 950 000
Note: Retained Income
Balance beginning of the year
Net profit after tax
Repurchase of 100 000 shares at above average price
Dividends
Balance end of the year
1 800 000
1 600 000
(360 000)
(1 300 000)
1 740 000
1 300 000
1 500 000
0
(850 000)
1 950 000
REQUIRED
 Calculate the cash flows from financing activities
 Show how the cash flows from financing activities would appear on the face of the
Cash flow statement
Calculation of Ordinary Share Capital
Balancing
amount
Bank
Re-construct the Ordinary Share Capital account
ORDINARY SHARE CAPITAL
Balance
b/d
RETAINED INCOME
given
Cash paid out for repurchase of shares = ______________________________________
ANSWER
CASH FLOW STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2015
Cash flows from operating activities
Cash generated from operations
Interest paid
Dividends paid
Taxation paid
Cash flows from investing activities
Purchase of non-current assets
Proceeds from sale of non-current assets
Investments matured/repaid
Cash flows from financing activities
Proceeds from issue of shares
Repurchase of shares
Proceeds from long-term borrowings
Repayment of long-term loans
24 Accounting Grade 12 - CAPS
1
*3
*4
*5
inflow
outflow
9
LESSON
ANSWERS OF CASH FLOW STEP-BY-STEP
24
Teacher and learners should do this step-by-step
activity together
ACTIVITY 2.1 – The three main activities
CASH FLOW STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2015
Note
s
Cash flows from operating activities (440 000- 276 000)
Cash generated from operations
Interest paid
Dividends paid
Taxation paid
R
164 000
1
*3
*4
Cash flows from investing activities
(98 000)
Purchase of non-current assets
Proceeds from sale of non-current assets
*5
Cash flows from financing activities (240 000+140 000 – 170 000)
105 000
Proceeds from issue of shares
Proceeds from long-term borrowings
Payment of long-term loans
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Balance
Receipts
b/d
Balance
b/d
24 Accounting Grade 12 - CAPS
(balancing amount)
BANK
10 000 Payments
820 000 Balance
830 000
286 000
2
2
2
276 000
10 000
286 000
c/d
544 000
286 000
830 000
10
ACTIVITY 2.2 - NOTE I - Reconciliation between profit before taxation
and cash generated from operations
NOTE 1
1.
Reconciliation between profit before taxation and cash generated from
operations
Profit before taxation
Adjustments in respect of:
Interest paid
ADD amount
Depreciation
ADD amount
Operating profit before changes in working capital
Changes in working capital
(Increase) / decrease in inventories
(Increase) / decrease in trade and other receivables
Increase / (decrease) in trade and other payables
Cash generated from operations
60 000
12 000
32 000
104 000
80 000
20 000
12 000
216 000
CASH FLOW STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2014
Notes
R
Cash flows from operating activities
Cash generated from operations
Interest paid
subtract
Dividends paid
Taxation paid
Cash flows from investing activities
Purchase of non-current assets
Proceeds from sale of non-current assets
Investments matured/repaid
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from long-term borrowings
Payment of long-term loans
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
24 Accounting Grade 12 - CAPS
1
216 000
(12 000)
*3
*4
*5
2
2
2
11
ACTIVITY 2.3 - NOTE 2 - Cash and cash equivalents
To calculate the net change, subtract
the amount of last year from this year,
e.g.
R18 000 – R25 000 = (R7 000)
NOTE 2
2.
Cash & cash equivalents
Bank
(18 000 – 25000))
Cash float (900 – 500)
Petty cash (700 – 600)
(19 600 – 26 100)
NET CHANGE
(7 000)
400
100
(6 500)
2015
18 000
900
700
19 600
2014
25 000
500
600
26 100
CASH FLOW STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2015
Notes
Cash flows from operating activities
Cash generated from operations
Interest paid
Dividends paid
Taxation paid
Cash flows from investing activities
Purchase of non-current assets
Proceeds from sale of non-current assets
Investments matured/repaid
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from long-term borrowings
Payment of long-term loans
Net change in cash and cash equivalents
(balancing amount)
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
24 Accounting Grade 12 - CAPS
R
1
*3
*4
*5
2
2
2
(6 500)
26 100
19 600
12
ACTIVITY 2.4
Note 3 - Dividends paid
Note 4 - Taxation paid
INFORMATION
Extract from the Income Statement 2015
Notes
Sales
Cost of sales
Gross profit
Operating expenses
Wages
Depreciation
Sundry expenses
Operating profit
Profit before interest expense
Interest expense / financing costs
Net profit before tax
Taxation
Net profit after tax for the year
Notes to the financial statements 2015
9
Retained income
Balance last day of previous year
Net profit after tax
Dividends on ordinary shares
Paid
Recommended
Balance last day of current year
R
3 200 000
(2 000 000)
1 200 000
(900 000)
800 000
80 000
20 000
300 000
300 000
(40 000)
260 000
(122 000)
138 000
Income tax
It is not correct to say
R122 000 was paid for
income tax this year.
R12 400 from last year
has been paid this year.
R10 800 is still owed at
the end of this year.
Therefore income tax
paid for this year is:
R122 000 + R12 400
– R10 800 = R123 600
48 000
138 000
(120 000)
(48 000)
(72 000)
66 000
Additional information
Trade and other payables
SARS (Income tax)
Shareholders for dividends
2015
10 800
72 000
REQUIRED
Prepare the following:
 Note 3: Dividends paid
 Note 4: Taxation paid
Show how these amounts will appear on the face of the
Cash flow statement
24 Accounting Grade 12 - CAPS
2014
12 400
40 000
Dividends
Dividends
Dividends
It It
is is
not
not
correct
correct
toto
say
say
It is not correct
to
say
R120
R120
000
000
was
was
paid
paid
forforfor
R120 000 was paid
dividends
dividends
this
this
year.
year.
dividends
this
year.
R40
R40
000
000
from
from
last
last
year
year
has
has
R40 000 from
last
year
has
been
been
paid
paid
this
this
year.
year.
been
paid
this
year.
R72
R72
000
000
is is
still
still
owed
atat
the
thethe
R72
000
is owed
still
owed
at
end
end
of
of
this
this
year.
year.
end of this year.
Therefore
Therefore
dividends
dividends
paid
paid
forfor
Therefore
dividends
paid
this
this
year
year
is:
is
for this year is
R120
R120
000
000
++
R40
R40
000
000
R120
000
+ R40
000
––
R72
R72
000
000
==
R88
R88
000
000
– R72
000
= R88
000 13
ANSWER
NOTE 3 - DIVIDENDS PAID
3. Dividends paid
Amounts in financial statements
Balance on last day of previous year
Balance on last day of current year
Dividends paid
(120 000)
(40 000)
72 000
Outflow always bracketed
Outflow always bracketed
Not paid -not bracketed
(88 000)
OR
SHAREHOLDERS FOR DIVIDENDS
Bank
????
Balance
88 000 Balance
c/d
72 000 Dividends
160 000
Balance
b/d
40 000
b/d
120 000
160 000
72 000
NOTE 4 - TAXATION PAID
4. Taxation paid
Amounts in financial statements
Balance on last day of previous year (credit bal.)
Balance on last day of current year (credit bal.)
Taxation paid
(122 000)
(12 400)
10 800
Outflow always bracketed
Unbracked if debit balance
Bracketed if debit balance
(123 600)
OR
Bank
??????
Balance
c/d
SARS (INCOME TAX)
123 600 Balance
10 800 Income tax
134 400
Balance
b/d
b/d
12 400
122 000
134 400
10 800
CASH FLOW STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2015
Notes
Cash flows from operating activities
Cash generated from operations
Interest paid
1
Dividends paid
Taxation paid
*3
*4
Cash flows from investing activities
Purchase of non-current assets
Proceeds from sale of non-current assets
Investments matured/repaid
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from long-term borrowings
Payment of long-term loans
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
R
(88 000)
(123 600)
*5
2
2
2
Learners should choose the method they prefer best
calculating these two amounts
24 Accounting Grade 12 - CAPS
14
ACTIVITY 2.5 NOTE 5 - INVESTING ACTIVITIES:
Tangible assets purchased
Investments (fixed deposits)
Calculation of vehicles bought: METHOD 1
Use the note for tangible assets. Fill in all given information.
When calculating the unknown amount, start at the bottom and add back.
Start with R417 000, add R126 000, add R36 000, subtract R264 000 = R315 000
NOTE: Fixed assets
Carrying value beginning of year
Additions at cost
Disposals at carrying value
Depreciation for the year
Carrying value at end of the year
????????
Vehicles
264 000
315 000
(36 000)
(126 000)
417 000
Unknown amount
Additions at cost = assets bought during the year
Add back
Calculation of vehicles bought: METHOD 2
VEHICLES
Balance
Bank
b/d
(bought)
Balance
612 000 Asset disposal
??
315 000 Balance
??????
b/d
c/d
927 000
870 000
57 000
870 000
927 000
ACCUMULATED DEPRECIATION ON VEHICLES
Asset disposal
Balance
??
c/d
21 000 Balance
453 000 Depreciation
474 000
Balance
b/d
b/d
348 000
126 000
474 000
453 000
ASSET DISPOSAL
Vehicles
??
24 Accounting Grade 12 - CAPS
57 000 Accum depreciation
Bank
57 000
??
21 000
36 000
57 000
15
ANSWER
NOTE 5 - TANGIBLE ASSETS PURCHASED
Land and buildings
Equipment
Vehicles
(315 000)
Fixed assets bought
(315 000)
Outflow
CASH FLOW STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2015
Notes
Cash flows from operating activities
Cash generated from operations
Interest paid
Dividends paid
Taxation paid
Cash flows from investing activities
Purchase of non-current assets
## purchased - outflow
Proceeds from sale of non-current assets
### selling price - inflow
Investments matured
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from long-term borrowings
Payment of long-term loans
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
R
1
*3
*4
*5
21 000
(315 000)
36 000
300 000
2
2
2
## = outflow of cash (bought the assets)
### = inflow of cash (selling price received)
It is suggested that learners use METHOD 1.
It is easy to make mistakes using method 2 and it is also
too time consuming
24 Accounting Grade 12 - CAPS
16
ACTIVITY 2.6
Financing activities: shares and loans
ACTIVITY 2.6.1 – Issue of new shares and repayment of loan
CASH FLOW STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2015
Notes
R
Cash flows from operating activities
Cash generated from operations
1
Interest paid
Dividends paid
*3
Taxation paid
*4
Cash flows from investing activities
Purchase of non-current assets
*5
Proceeds from sale of non-current assets
Cash flows from financing activities
Proceeds from issue of shares
(640 000 – 528 000) inflow
112 000
Proceeds from long-term borrowings
Repayment of long-term loans
(864 000 – 792 000) outflow
(72 000)
Net change in cash and cash equivalents
2
Cash and cash equivalents at beginning of year
2
Cash and cash equivalents at end of year
2
24 Accounting Grade 12 - CAPS
17
ACTIVITY 2.6.2 – Includes repurchase of shares
Calculation of Ordinary Share Capital
Re-construct the Ordinary Share Capital account
Balancing
amount
Bank
(100 000 shares)
Balance
ORDINARY SHARE CAPITAL
Balance
????
b/d
1 600 000
c/d
4 000 000
5 600 000
Balance
b/d
5 600 000
5 600 000
4 000 000
RETAINED INCOME
Bank
(100 000 shares)
360 000
given
Cash paid out for repurchase of shares = 1 600 000+ R360 000 = R1 960 000
ANSWER
CASH FLOW STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2015
Cash flows from operating activities
Cash generated from operations
Interest paid
Dividends paid
Taxation paid
Cash flows from investing activities
Purchase of non-current assets
Proceeds from sale of non-current assets
Cash flows from financing activities
Proceeds from issue of shares
Repurchase of shares
Proceeds from long-term borrowings
Repayment of long-term loans
24 Accounting Grade 12 - CAPS
1
*3
*4
*5
outflow
(1 960 000)
18