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January 4, 2017 at 10:37 pm
hi mike thank you for your lectures
can you tell me if this is corrected
net cash flow for the year ( 92)
cash & equivalent b/f 81
Cash & Equivalent in C/F balance is (17+32)-60= = 11
January 5, 2017 at 8:45 am
Why do you think that it may be corrected?
Here’s the relevant extract from the answer on page 194 of the free course notes
“Net decrease in cash and cash equivalents (92)
Cash and cash equivalents at start of the year 81
Cash and cash equivalents at end of the year (17 + 32 – 60) (11)”
January 5, 2017 at 4:11 pm
I wasn’t sure thank you smiling
January 5, 2017 at 4:26 pm
May 31, 2016 at 8:56 pm
I guess we have missed the increase in bank balance of $60K.
And as I can see the comments above there is a difference of $92K in Receivables, this is the reason the answer is not matching.
If we add the Bank in Cash & Equivalent in C/F balance then there is we got a positive balance of $28K not $32K in negative
June 1, 2016 at 8:24 am
It’s on my list of lectures to re-record!
I changed the figures to bring the question more into line with F7 cash flow questions – but I changed the figures after I had recorded the lecture 🙁
June 1, 2016 at 7:41 pm
It’s totally fine but I want to ask that what we have to do with the changes in bank balance?
Do we have to add in cash and cash equivalent?
If no then what we have to do with that?
June 1, 2016 at 10:12 pm
Changes in cash and cash equivalents are in the bottom three lines of the statement of cash flows
Marylise Sacco says
April 30, 2016 at 12:18 am
First of all keep up the good work you’re doing:)
Secondly, can you kindly explain to me from where is the $364 re ‘Purchase of Investments’ coming from please? As I was doing 396-125 (taken from the question and not 364-125.
Thank you in advance and happy weekend 🙂
April 30, 2016 at 7:44 am
Hi, isn’t there a note to the question that says something like “32 of the investments were considered to be cash equivalents”?
April 30, 2016 at 11:03 am
Oops!! missed that.. Thanks so much
April 30, 2016 at 7:24 pm
No problem – RTFQ
November 28, 2016 at 4:35 am
But does not it mean that investments are less than it hsould be so we should not deduct, but add 32?
November 28, 2016 at 7:07 am
Put it in T accounts and you’ll see the rationale much more easily
I believe the question states that “Included within investments …”
March 7, 2016 at 10:10 am
Great lecture, brilliant wit throughout.
Shame about the omissions but that should in no way affect students and it’s a useful lesion that even those that do this day in day out can make a mistake.
The lesson is take your time and take care.
March 7, 2016 at 8:29 am
Hi Mike, Thank you so much, I have learned a lot from you. I want to highlight 1 mistake beside overdraft omission, Receivables increased by 92 not 32, so you miss inflow of OD amount of 60 and outflow of Receivables of 60. Thats why there is no effect, 60 – 60 = 0.
One Question, OD will be treated in Operating or Financing activity???
April 28, 2016 at 9:51 am
I wonder if at the time of recording the notes were different. In these notes receivables are 584 and 492 for 2009 and 2008 respectively, and there is 60 bank overdraft. There are no workings shown in the lecture and nobody from the audience points out that there is a mistake.
April 30, 2016 at 8:00 am
I ALWAYS treat the overdraft as cash equivalent
January 29, 2016 at 2:52 am
Hi, please why did you leave out overdraft of in the calculation of cash and cash equivalent? Am confused about it.
January 29, 2016 at 6:02 am
I can’t believe that I have missed it out! Please check and confirm whether I DID or I DIDN’T include the overdraft – it will save me a job of looking it up if you will check it for me – thanks
January 31, 2016 at 1:24 pm
Hi Mike, Thank you so much for the lectures, just a little confused on the end part, maybe I am missing something.
In the solution in the actual written notes the net decrease for the Year is -92 and end of year is -11 ,as opposed to -32 and 49 in the lecture .
In the lecture Receivables are 32K and in the written notes they are 92 k which covers the 60K difference.
As the Overdraft is also 60K , I just want to clarify that the overdraft treatment is only to be looked at in the net increase/decrease in cash and cash equivalents and nowhere else on a cash flow?
September 30, 2015 at 5:10 am
How you got (32)
at the last of question 6?
September 30, 2015 at 9:16 am
From the statements of financial position, we have brought forward and carry forward cash + bank positions (don’t miss the overdraft, nor any cash equivalents in the notes to the question)
Check it out and let me know if you still have a problem
May 21, 2015 at 5:20 pm
This is probably going to sound rediculous but how do you calculate the depreciation to be 50??
I really am struggling to reconcile this one, thank you.
May 2, 2015 at 11:22 pm
Why is the increase in receivable (CF from operating activities) 32. I am getting 92 i.e 584 for 2009 – 492 for 2008 = 92
Am I missing anything?
May 3, 2015 at 12:00 am
Yes! You didn’t read the other posts on this thread before you typed yours!
This is one of the lectures that I need to rerecord
September 5, 2015 at 2:16 pm
Is the new recording available for this?
September 5, 2015 at 3:19 pm
Hi Paula, no, I haven’t been able to do a lot of recording this Summer, sorry
April 11, 2015 at 10:52 am
March 24, 2015 at 8:07 am
Sir, thank you for the lecture!
I have one question. In the balance sheet, there is a current liability to bank. I wonder how current liability to bank affects statement of cash flows.
March 24, 2015 at 6:10 pm
This would be better posted on the “ask the tutor” forum – it’s just fortunate that I happened to see it this time!
The whole aspect of bank overdrafts is dealt with within the video lectures. Have you watched them? If not, please do so. If you have watched the videos, please let me ask you to watch again but this time pay attention!
If you’re still stuck, post again but, next time, post on “Ask the tutor” forum
November 27, 2014 at 1:32 pm
Just started studying this lesson for F7 december exams! But I have done basic and comprehensive questions on cash flows for O/L, A/L & AAT exams… But never got a clear lecture like this! I have no words….. thanks alot Sir! May God bless you in many ways!
November 27, 2014 at 4:14 pm
You’re welcome – and welcome too to opentuition 🙂
October 27, 2014 at 1:33 pm
under the CL, we have an overdraft balance of $60, so when we will calculate the cash and cash equivalent C/F for end of the year, then will we not take into consideration? if then, this extend C/F balance coming $(11). Even on the notes it shows like that as well.
copied from notes
Net cash flow from financing activities 360
Net decrease in cash and cash equivalents (92)
Cash and cash equivalents at start of the year 81
Cash and cash equivalents at end of the year (17 + 32 – 60) (11)
October 30, 2014 at 7:16 am
The notes are correct – the carry forward amount is (11)
Thanks for pointing this out – I should really re-record the lecture
October 30, 2014 at 9:40 am
you welcome sir..
September 9, 2014 at 6:03 am
Sir you said that when we start a statement of cash flow the 4th figure to write down is ‘net cash flow for the year” I would like know how u got net cash flow for year (32) in example 6 please?
September 9, 2014 at 7:20 am
By putting in the “Cash and equivalents carried forward”, then the “Cash and equivalents brought forward” that then means that you can arrive at “Net cash flow for the year”
Can you agree “Cash and equivalents brought forward” as $81?
Can you see the cash balance at the end of the year is $17 (in the current assets)?
And you can see the overdraft amount of $60 carried forward (in the current liabilities)?
And you’ve read note 3 on page 112?
September 18, 2014 at 5:20 am
thanks, I see it clearly now.
September 18, 2014 at 5:26 am
May 23, 2014 at 9:54 pm
The increase in receivables should be 92 according to the notes and not 32.
The original figures are:
2008 – 492
2009 – 584
There fore the net cash flow should be 11 negative according to notes answers.
May 23, 2014 at 9:55 pm
oh alright I just read the below comments
March 27, 2014 at 11:06 pm
The voice isn’t synchronized with the movements on the screen. The screen moves at 4 or 5 seconds ahead of the voice. Kindly do fix to avoid any future inconvenience. Thanks
February 28, 2014 at 10:54 am
Sir, i understand how you arrived at all the figure except for the increase in receivable which i was thinking should be (584-492) 92…. i cant figure out how you got the 32…. i know i missing something in there. do help me please.
April 21, 2014 at 7:20 am
Same problem here
May 1, 2014 at 10:30 pm
Same here – I think the notes have been updated since the lecture – check the answers; it’s 92 there (although you then end up with a cash c/fwd of -11. This is also in the answer and you have to adjust for the overdraft (60) from the bank which was not in the original lecture.
Fabulous lecture Mike. Thank you!
May 23, 2014 at 10:03 pm
I have a comment on the notes answers as the 60 at the bank at the end of year 2009 isn’t an overdraft and should add up to the 32 and 17 giving a total of 109 !
we deduct that from the 81 opening balance to arrive at a positive net cash flow of 28 (if receivables figure in the cash flow statement is 92 negative)
February 27, 2014 at 4:56 pm
February 27, 2014 at 2:07 pm
February 4, 2014 at 9:30 pm
I have a question Mr Mike little: You explained why intangible assets are amortised and why tangible assets are depreciated. Say for goodwill (INCA) – does it not increase with time?
February 5, 2014 at 8:16 am
You need to be careful here! Why did you stop at “goodwill” – until the recent property price crash, land and buildings values were also increasing. In fact, if you had bought pretty well any property in the UK 40 years ago, it’s most likely that its value in 2014 is substantially greater than you would have had to pay 40 years ago.
Right! So what’s depreciation about? Is it to ensure that the carrying value of an asset is somewhere close to its market value? A resounding NO! Depreciation is to allocate to those years that benefit from the use of an asset the proportionate share of the cost of that asset over its estimated useful life. So even though the value of an asset may well increase over time, nevertheless we depreciate it.
Now goodwill. You’re right of course. Goodwill can increase in value, particularly where we work hard at building up good relations with our suppliers, customers, bank, employees, shareholders – in fact, all our stakeholders. But can you not see that that is an increase due to our own efforts? This is “internally generated” goodwill and, of course, this is NOT recognised in the financial statements.
Where we have purchased goodwill on the acquisition of a subsidiary …. well that’s a different story. Like the buildings mentioned earlier in this post, a number of years are hopefully going to benefit from that acquisition, so we shall impair it – typically over a period not lasting greater than 20 years, but it will be subjected to an annual impairment review until it is fully “used up”
But even after it’s been fully impaired, we are still getting benefits from this notional, intangible asset! Yes, but that’s because we have been working hard at building up good relationships with our suppliers, customers etc and that maintenance of good relations is as a result of our own efforts – that is, it’s internally generated. So no recognition
February 5, 2014 at 8:58 pm
That is brilliant. I love your lectures and you are certainly one of the best teachers I’ve learned from! Thank you.
JEAN CLAUDE says
December 10, 2013 at 2:02 am
Just new op tuition and quite happy to join the crew. Mr mike seems to be very resourceful.
Well since we’re dealing with IAS7, could you give me the steps to follow when dealing with a mid year acquisition?
Would be going in for F3 in a couple of hours.
December 10, 2013 at 8:55 am
Mid-year acquisitions are not relevant for F7 cash flows! Let’s leave that one until we get to P2! particularly since you’ve only just finished F3 – did you pass?
December 10, 2013 at 12:05 pm
Well I wrongly quoted the standard. Wanted the know more about their treatment in the consolidated income statement.
Went in for the paper based examsn’ waiting for feb 8th.
December 10, 2013 at 12:08 pm
Hope you did enough to pass – fingers crossed until February
December 10, 2013 at 12:26 am
Thanks mr mike and please i want ask
why you do not do working in SCF like consolidation financial statements ? and is marker give me marks on my working? and if my last figure is wrong i will take marks on my all answer ? and for your shortcuts like TNCA can i use it like you or can i change it ?
December 10, 2013 at 8:01 am
There really is no need to get into workings as complicated as for consolidations. The most difficult is the working for TNCA but even that becomes relatively easy with practice.
Yes, you will get marks for workings if you don’t have the time to finish the cash flow statement – but you need to head up your workings to identify which figure you are calculating and therefore also how much CASH is involved in, say, investment income received.
If you follow my style of attacking these questions, your last figure cannot be wrong! If you mean the figure that you have just calculated in your workings, say, investment income received, then you will not gain the mark.
Work on the principle that for each and every figure you get correct in the Statement of Cash Flows, you will earn one mark
I would abbreviate TNCA, INCA, C & E, Pbles, Rbles …..yes, I would abbreviate – just so long as your abbreviation is pretty clear. A bit of a problem with “inv” for inventory and “inv” for investments
December 11, 2013 at 7:06 pm
Thanks Mr Mikel
I use instead Pbles , AP and instead Rbles AR AND (COST OF SALES ) Cogs and other shortcut what about that ? i can use it when when i prepare financial position or cash flow in exam? and some Terminology i do not know shortcut for it like( accrued expenses ) can i write full term like ( accrued expenses ) and TNCA in the same financial statement see that
A R 50
account payable 100
thanks mr mike
December 11, 2013 at 7:11 pm
You can use whatever abbreviations you want and anywhere EXCEPT in report / letter / memorandum writing
December 11, 2013 at 7:24 pm
Ok thanks alot mr mikel
December 11, 2013 at 7:27 pm
October 22, 2013 at 8:01 pm
You were great !!! Thanks for increasing self confidence ! This really helps !!!
September 24, 2013 at 12:34 am
well explained 🙂 Dankie!
July 25, 2013 at 10:53 am
Hi all , another wonderful lecture, thanks Mike.
could someone please help me with a few issues as i seem to understand this lecture but there are two things i cant get around.
1. how do we work out the $32 increase in receivables? am i wrong to assume it should have been $584 – $492 = $92
2. in the answer at the back of the text, the cash &equivalents c/f were worked out as 17+32-60 = $(11). the bank liability of $60 was included.
August 6, 2013 at 3:51 pm
Hi Frank, thanks for your appreciative comments. The answer in the back of the notes shows the increase in receivables as (92). That’s correct so far as I am concerned 🙂
The cash and equivalents figure HAS included as a deduction the 60 overdraft at the bank at the end of the year netted off the figure of 17 + 32. So, yes, I ALWAYS include the overdrawn position as a cash and equivalent amount although, in practice, consideration needs to be given to the nature of the overdraft – is it long term financing or is it a short term element of cash and equivalents. If it’s long term, then it would probably be more correct to include the amount in the “Financing” section of the Statement of Cash Flows rather than as a Cash and Equivalent amount
July 25, 2013 at 10:44 am
hi all. thanks Mike, nice lecture as i seem to understand whats happening. I’ve got one question Mike,
how do you work out the increase in receivables, am i wrong to assume its $ (584 – 492) = $92
also in your answer at the back of the text, cash equivalents c/f are worked out as 17+32-60 = $(11) the bank liability is included in the working. please advise as i can’t get around this. thanks for the effort.
May 25, 2013 at 11:28 am
Can someone help me with the treatment of interest under operating cash flow please?
In Kaplan exam kit some of the answers do not add interest expense and then deduct it but instead they just deduct it, so my question is when do I add and deduct and when do I simply deduct it? Is there something in the question that need to watch out for?
May 25, 2013 at 12:18 pm
The start point is pbt. If interest has NOT been deducted in arriving, but the start given is pbit, then we need to deduct interest to arrive at pbt. That’s the top figure in the cash flow.
One of the first things we then do is add the interest back – the same figure we have just deducted.
Then we need to calculate the amount of interest actually paid and deduct that as Cash paid in the operating activities of the Statement of Cash Flows
Does that clear it up for you?
May 25, 2013 at 12:45 pm
Thank you very much Mike. It really helped, I’ve compared few question and answers they now make sense. Thank you again.
April 8, 2013 at 10:52 pm
Thank You very much Mike for your Teachings. Being listening to the Lectures and I understand it clearly.
April 10, 2013 at 7:20 pm
Good, and good luck with F7 exam
March 6, 2013 at 7:41 am
In SCF, which profit figure to be used, Profit before Tax or Profit before Tax & Finance Cost?
April 10, 2013 at 7:15 pm
January 12, 2013 at 7:55 pm
what is the difference between cash and profit?
April 10, 2013 at 7:13 pm
I’ve just sold my car for $10,000
How much profit have I made?
Can you confirm that you are genuinely an F7 student?
April 21, 2013 at 1:26 pm
I wish OpenTuition had a like button. 😀
April 21, 2013 at 4:06 pm
we have ‘share’ buttons, so share this page if you like it 🙂
October 20, 2012 at 4:08 am
dear lecture is the layout of statement of cash flow will be given in the exam?
October 20, 2012 at 8:57 am
@niko123, Why on this Earth would it be? A simple answer to your question is “No”. A fuller answer involves some words which I would rater not use in the public domain!
October 21, 2012 at 12:11 am
@MikeLittle, sorry Mike for this stupid question
October 7, 2012 at 11:05 am
can someone teach me how to get the revaluation amount of $110,000?
thanks a lot.
October 7, 2012 at 12:25 pm
@valenyap86, In the Statement of Financial Position, per the question, in the Equity section, third line, you’ll see the words “Revaluation surplus”. If you move your eyes to the right along that line, you come to the figures “150” and “40”
Now, by deducting “40” from “150”, you arrive at “110”
Does that answer it for you?
October 9, 2012 at 4:03 pm
@MikeLittle, yes, thanks …!!
April 21, 2013 at 1:29 pm
Pristine! I had the same question and I’m glad I found it without asking.
An ‘awefully’ (punning to an F4 lecture of yours) good lecture, this. 🙂
Thanks so much, Mike.
October 1, 2012 at 5:13 pm
hello, good example but I’m confused about one thing…in arriving at the figure of (239) for purchase of investments, why is the 32 taken away from to get 364…..isn’t that 32 related to the receivables?
October 1, 2012 at 5:19 pm
@r2d2, never mind ……it WAS in the investments ….shux!
September 26, 2012 at 9:35 pm
I have noticed in the notes I printed that investments in 2009 are 396
in your answer they are 364.
it stumped me for ages….
September 27, 2012 at 6:22 am
@aardvark, But are you ok now?
September 21, 2012 at 1:37 pm
Can you help me with the “1 for 4 bonus” part? I don’t get it why it is valued at $75,000 from the share premium account. Thanks.
September 21, 2012 at 6:47 pm
@alextrunghuynh, Ok … what’s the problem? The calculation to arrive at 75,000 or the fact that the debit entry has gone to Share Premium? ( The credit entry has gone to increase the Share Capital from 300,000 to 375,000 )
If the problem is the calculation of 75,000 that’s easily sorted! How many shares were in existence at the date just before the bonus issue? Last year’s shares brought forward = 300,000. A “1 for 4” bonus issue means that, for every 4 shares you previously held, the company will give you 1 more share. So, for 300,000 shares there will be an additional 75,000 shares issued as bonus shares.
If the problem is “Why the Share Premium Account” it’s because there are only four allowable uses of the Share Premium, and the most valuable one – where you can use up the greatest amount of Share Premium. So, we’ve calculated 75,000 and I’ve explained WHY the Share Premium Account. The double entry to record the bonus is therefore is Debit Share Premium Account and Credit Share Capital Account. The entry will be recorded in the Statement of Changes in Equity
September 21, 2012 at 9:07 pm
@MikeLittle, Yes indeed. Thank you. I really appreciate it.
June 2, 2012 at 1:55 pm
maybe I am having blonde moments. I accessed the lecture where can I get the questions, ZETA. I have been doing the revisions based on ACCA past papers but on this one I do not KNOW where the ZETA question is , please help
June 2, 2012 at 2:39 pm
May 1, 2012 at 8:32 pm
Really very good example 6 ALL IN ONE. moreover, for better understanding the whole cash flow. if your double entry is very strong.
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