Chapter 15 - Statement Of Cash Flows

Question 1

Cash Flow Statement

Answer 1

Cash at the end of the year
Cash at the start of the year
Changes in cash during the year

Question 2

Difference between cash and profits

Answer 2

> Revenue is claimed when earned, not received
The profit calculation includes non-cash transactions
The cash balance can be affected by things that will not affect profit

Question 3

IAS 7 Statement of Cash Flow

Answer 3

3 different activities:
> Operating Activities
> Investing Activities
> Financing Activities

Question 4

Operating Activities

Answer 4

Working capital

> Accounts receivables
Accounts payables
Inventory

Question 5

Calculating Cash Outflows from Operating Activities

Answer 5

> Direct Method

> Indirect Method

Question 6

Direct Method

Answer 6

Operating Cash Received:

• Sales
• Other Income

Operating Payments made:

• Cost of Sales
• Operating Expenses
• Income Tax

Cash from Operating Activities

Question 7

Cash from Sales

Answer 7

Accounts receivable T/Accounts

• Balance B/F
• Add: Sales
• less: Balance C/D
• Cash Receipts

Question 8

Indirect Method

Answer 8

> Identify Net Profit
Adjust the Non-Cash Items
Calculate the changes in the working capital

Question 9

Indirect Method Calculation

Answer 9

Profit before Taxation 
Adjustments:
> Depreciation 
> Gain on Disposal 
Working Capital Changes:
> (Increase)/Decrease in Trade receivables
> (Increase)/Decrease in inventories 
> Increase/(Decrease) in Trade Payables 

Cash generated from operating activities

Question 10

Investing Activities

Answer 10

> Purchase or Disposal on Non-Current Assets

> Purchase or Disposal of shares or bonds

Question 11

Investing Activities Cash Inflow

Answer 11

> disposal of property, plant and equipment
Dividends from a subsidiary
Receipts from loan repayments

Question 12

Investing Activities Cash Outflow

Answer 12

> Payments for Acquisition of property, plant and equipment
Payments for Acquisition of other entities
Payments for Acquisition of interest in joint Venture

Question 13

Purchase of non-current Assets

Answer 13

Non-current Assets

Balance B/D

• Revaluation
• Cash Paid (balancing)

Balance C/D

• Disposal
• Depreciation

Question 14

Financing Activities Cash Flow

Answer 14

Inflows:

• Cash from issue of new shares
• cash from debt borrowing

Outflows:

• cash to acquire shares
• Dividend payments
• repayments of debt borrowing
• payments related to finance leases