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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Cash flow adjustments – BPP Hill question
Hello tutor,
I need your help to understand working capital adjustments.
Statement of cash flow is as follows :
Increase in Inventories: -842.40
Increase in trade receivables -379.2
Increase in trade payables 224.20
When subsidiary is disposed and inventory’s YE figure decreases in the statement of financial position (we need to take off the inventory on disposed subsidiary from groups BS)why the adjustment of £200.5 is increasing the difference of inventories in statement of cashflow to £1042.9 ?
The same with receivables, subsidiary’s Trade debtors are removed from groups BS hence the difference op-cl balance is smaller, but cashflow adjustment increase cash to £560.5.
I cannot logically explain how it works, can you please explain ?
On a sale of sub, the new owner will receive the sub’s inventory , receivables etc.
So, on a sale:
OPENING INVENTORY MINUS INVENTORY OF SUB SOLD +/- CASH PAID/RECEIVED = CLOSING INVENTORY
You may find it useful to watch our cash flow lecture again
🙂
Thank you for the advice. I watched the lecture and all does make sense now.
Many thanks 🙂
🙂
