Docstoc

In Statement Of Cash Flow

Document Sample
In Statement Of Cash Flow Powered By Docstoc
					Stage 2 Accounting Studies                                                             Assessment Exemplar
Assessment Component 2: Course Work
Task description: Beginning Exercises – Statement of Cash Flows
Topic: Section2 – Financial Accounting

 Note: This set of ‘Beginning Exercises’ is more of an introduction to the study of the Statement of Cash Flows,
                                 rather than a summative assessment exemplar

Purpose
The purpose of the Statement of Cash Flows is to assist in assessing the ability of the business to:
     generate a positive cash flow
     service its debts
     fund any future expansion
     acquire external funds, e.g., loans
     pay drawings

The Statement of Cash Flows provides a link between the Income Statement and the Balance Sheet.

Categorisation
There are three general categories of activity:
     operating
     investing
     financing

In each of these areas cash is received, inflows, and paid, outflows.

Questions
1    Explain what is meant by ‘cash flows’.
2    What is the purpose of preparing a Statement of Cash Flows?
3    Categorise the items in the cash at bank account into one of the operating, investing or financing categories
     of activity.
                                              TRIGG POINT
                                         CASH AT BANK A/C (extract)
       2007                                               2007
       Jul     1     Debtors                      2 000   Jul       1     Creditors                      500
               4     Rent Revenue                   400             2     Wages                          200
               9     Capital – T point            4 000             3     Creditors                    2 000
               16    Loan from Bank SA            6 000             4     Wages                          200
               17    Sales                        2 300             7     Interest                       300
               18    Debtors                      1 200             16    Office Expenses                200
               20    Commission Revenue           3 000             19    Creditors                    3 000
               21    Rent Revenue                   400             22    Loan repayment               4 000
               24    Sales                          500             24    Drawings                       600
               27    Debtors                      1 000             26    Motor Vehicle                8 000
               29    Interest Revenue                50             27    Purchases                      200




    SSABSA Support Materials: 118e1ceb-54c8-46a0-b400-ed0d6fc88d80.doc, last updated 12 July 2009
                                           page 1 of 2
4.   From the following transactions identify which belong in the operating, investing and financing categories
     of the Statement of Cash Flows
        cash received from selling inventory
        cash received from customers
        cash paid off a loan
        cash dividends received
        cash purchase of a motor vehicle

5    From the following information prepare the ‘operating activities’ section of the Statement of Cash Flows
     for the period ended 30 June 2007
        Dividend received                      $20 000
        Interest paid                            1 000
        Payment to Suppliers                     7 000
        Proceeds from borrowings                25 000
        Interest received                          500
        Proceeds from sale of equipment         10 000
        Receipts from Customers                 23 000

6    From the following information prepare the ‘investing activities’ section of the Statement of Cash Flows
     for the period ended 30 June 2007
        Proceeds from sale of equipment        $10 000
        Repayment of borrowings                  1 000
        Purchase of premises                    65 000
        Receipts from Customers                  5 000
        Payment for equipment                   70 000

7    From the following information prepare the ‘financing activities’ section of the Statement of Cash Flows
     for the period ended 30 June 2007
        Interest earned                         $5 000
        Proceeds from borrowings                10 000
        Proceeds from sale of equipment          4 000
        Capital contribution                     2 000
        Receipts from customers                  7 000
        Interest paid                              500
        Payment to suppliers                    12 000
        Repayment of borrowings                  1 000




     SSABSA Support Materials: 118e1ceb-54c8-46a0-b400-ed0d6fc88d80.doc, last updated 12 July 2009
                                            page 2 of 2

				
DOCUMENT INFO
Shared By:
Stats:
views:40
posted:7/12/2009
language:English
pages:2