Statement of cash flows (IAS 7)

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Statements of cash flows are examinable in the ACCA FR exam but only to the extent that you will be required to prepare extracts from the statement of cash flow, and only the indirect method will be examinable.

Statement of cash flows for the year ended [date]

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Cash flows from operating activities	$'000s	$'000s
Operating profit	X
Depreciation/amortisation	X
(Profit)/loss on disposal of PPE	(X)/X
Increase in inventory	(X)
Increase in receivables	(X)
Increase in payables	X
Cash generated from operations	X
Income taxes paid	(X)
Net cash generated from operating activities		X

Cash flows from investing activities
Proceeds from sale of PPE	X
Purchase of PPE	(X)
Interest received	X
Dividends received	X
Net cash used in investing activities		(X)

Cash flows from financing activities
Proceeds from issue of equity shares	X
Repayment of long-term borrowings	(X)
Proceeds from issue of long-term borrowings	X
Dividend paid	(X)
Interest paid	(X)
Net cash generated from financing activities		(X)

Net increase/(decrease) in cash and cash equivalents		X
Cash and cash equivalents at the beginning of the period		X
Cash and cash equivalents at the end of the period		X

Tax paid

Tax payable
		B/f – current tax	X
		– deferred tax	X

Bank (β)	X	Tax expense (SPL)	X

C/f – current tax	X
– deferred tax	X

	X		X

Property, plant and equipment (PPE)

PPE (CV)
B/f	X
		Depreciation	X
Revaluation	X
		Disposal	X
Cash - additions (β)	X

		C/f	X

	X		X

And,

π/λ on disposal

Proceeds

less

Carrying value

Equity shares

Issue of shares = movement in share capital and share premium

Every figure in the financing section is cash that actually moved in the year, not an expense. Interest paid has its own line in the layout above and is not rolled into the repayment of borrowings, and the amount shown for a repayment is the cash repaid, not the repayment plus the interest charged in profit or loss.

Borrowings

Issue of debt = increase in borrowings

Repayment of debt = decrease in borrowings

Dividend paid

Retained earnings
		B/f	X

Dividend paid (β)	X	Profit (SPL)	X

C/f	X

	X		X

Interest paid

Interest payable
		B/f	X

Bank (β)	X	Interest expense (SPL)	X

C/f	X

	X		X

Cash and cash equivalents

	B/f	C/f	Movement
Cash	X	X
Cash equivalents	X	X
Overdraft	(X)	(X)
	X	X	X/(X)

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Cash flow from operating activities

The following information relates to Geofrost, a limited liability company, for the year ended 31 October 20X7.

Extracts from the statement of profit or loss for the year ended 31 October 20X7

	$’000
Interest expense on borrowings and lease liabilities	(400)
Interest income	180
Profit before income taxes	15,000
Income taxes	(4,350)
Profit	10,650

Extracts from the Statement of financial position as at 31 October 20X7

	*20X7* *$000s*	*20X6* *$000s*

Current assets
Inventory	3,560	9,635
Receivables	6,405	4,542
Cash	2,045	1,063
	12,010	15,240

Current liabilities
Bank overdraft	1,230	429
Trade payables	7,562	4,364
Tax payable	3,020	2,760
	11,812	7,553

Additional information:

Depreciation expense for the year was $4,658,000

Assets with a carrying value of $1,974,000 were disposed of at a profit of $720,000

Prepare the cash generated from operating activities section from the statement of cash flows.

Statement of cash flows for the year ended [date]

	$’000s	$’000s
Cash flows from operating activities
Operating profit	15,220
Depreciation	4,658
Profit on disposal of PPE	(720)
Decrease in inventory (3,560 - 9,635)	6,075
Increase in receivables (6,405 - 4,542)	(1,863)
Increase in payables (7,562 - 4,364)	3,198
Cash generated from operations	26,568
Income taxes paid (W)	(4,090)

Net cash from operating activities		22,478

WORKINGS

Tax paid

Tax payable
		B/f – current tax	2,760

Bank (β)	4,090	Tax expense (SPL)	4,350

C/f – current tax	3,020

	7,110		7,110

Cash flow from investing and financing activities

The following information relates to Geofrost, a limited liability company, for the year ended 31 October 20X7.

Extracts from the statement of profit or loss for the year ended 31 October 20X7

	$’000
Interest expense on borrowings and lease liabilities	(400)
Interest income	180
Profit before income taxes	15,000
Income taxes	(4,350)
Profit	10,650

Extracts from the Statement of financial position as at 31 October 20X7

	*20X7* *$000s*	*20X6* *$000s*
Assets
Non-current assets	43,282	26,574

Equity and liabilities
Capital and liabilities
Equity share capital	19,365	17,496
Retained earnings	16,115	6,465
	35,480	23,961
Non-current liabilities
Loan	8,000	10,300

Additional information:

Depreciation expense for the year was $4,658,000

Assets with a carrying value of $1,974,000 were disposed of at a profit of $720,000

Prepare the following extracts from the statement of cash flows:
- Cash flow generated from investing activities
- Cash flow generated from financing activities

Cash flows from investing activities
Purchase of property, plant and equipment (W)	(23,340)
Proceeds from sale of property, plant and equipment (1,974 + 720)	2,694
Dividends received	180

Net cash used in investing activities		(20,466)

Cash flows from financing activities
Issue of equity shares	1,869
Repayment of long-term borrowings	(2,300)
Dividends paid (6,465 + 10,650 - 16,115)	(1,000)
Interest paid	(400)

Net cash used in financing activities		(1,831)

WORKINGS

Property, plant and equipment (PPE)

PPE (CV)
B/f	26,574
		Depreciation	4,658

Cash - additions (β)	23,340	Disposal	1,974

		C/f	43,282

	49,914		49,914

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