Test 3 Flashcards
Journal entry for issue of shares
Dr bank
Cr share application account
Dr share application account
Cr share capital (Owners Equity)
Journal entry for share issue costs
Dr Share issue costs
Cr bank
Cr share issue costs
Dr share capital
Operating activities
Relate to the principal revenue producing activities of the entity
Operating activities comprised of
Cash receipts from (sale of goods and rendering of services, commisions and other income)
Cash payments to ( suppliers, employers, tax authority)
Investing activities
Relate to the acquisition and disposal of non-current assets
Investing activities: cash receipts from
Cash receipts from:
- Sale of property, plant & equipment, intangibles and long term assets
- Sale of shares and debentures of other enterprises
- Repayment of loans made to others
Investing activities: cash payments to
- Acquire PP&E, intangibles and long term assets
- Acquire shares or debentures
- Advance loans to others
Financing activities
Relate to equity and borrowings
Financing actives comprises of
Cash proceeds from:
- increases in equity
- long term borrowing
Cash payments to:
- owners repayment for equity
- repay amount borrowed
Movement of cash equation
A = O+L
Cash + other assets = Equity + Liabilities
Cash = Equity + Liabilities - other assets
Movement in cash = movement in non-cash items
Activity type for non current asset
Investing
Current assets (minus bank) activity type
Operating activities
Equity and non current liabilities (loan from bank) activity type
Financing activities
Current liabilities activity type
Operating activities
Preparation steps of operating activities section
Profit before tax
Step 1 +/- Non-cash items
Step 2 +/- Non-operating items
= Operating cash flow before working capital changes
Step 3 +/- Working capital changes
= Cash generated from operations
Step 4 +/- Cash effects of non-operating items, dividends and tax
= Net cash flow from operating activities
Non cash items formula
Profit before tax
- Income items that do not result in inflow of cash
+ Expense items that do not result in outflow of cash
Non operating items formula
Reverse non-operating income and expense items included in
determination of profit for the period
• Examples of non-operating items include
• Investment income received
• Interest paid
Working capital changes formula
Profit before tax
-Increases in current assets
+Decreases in current assets
+Increases in current liabilities
- Decreases in current liabilities
Cash effects of non-operating items, taxation and dividends formula
Investment income received
Interest paid
Taxation paid
Dividends paid
Cash effects of non-operating items, taxation and dividends formula
Investment income received
Interest paid
Taxation paid
Dividends paid
Where are dividends found
Statement of changes in equity
Dividends are not an expense
Debit balance
statement of comprehensive income
Gross profit
Operating expenses
Operating profit (GP - OE)
Profit before tax (OP - finance costs and interest)
Other comprehensive income (revaluation surplus)
Total comprehensive income
Statement of Cash flows
CASH FLOWS FROM OPERATING ACTIVITIES
CASH GENERATED FROM OPERATING ACTIVITIES
NET INFLOW FROM OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITES
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax
Adjustments
Working capital changes
