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Excuse me , the question is : A made a profit for the year 18.750$ ,after accounting for depreciation of 1.250$ during the year , non current asset were purchased for $8000, receivable increased by $1000 , inventories decreased by $1800 and payable increased by 350$ . What was A increase in cash and bank balances during the year ?
So based on your lectures , I found the answer for this question . It’s 13.150 $
But when I looked at the question , ” what was A ‘s INCREASE in cash ” , and I thought that is a decrease .
As the profit for the year is 18750 and after the operating , investing activies . What left is 13.150? Can you pls explain ? RegardsI am not sure that I understand your confusion.
The profit was 18,750. To get the cash generated from operations, we add the depreciation, subtract the increase in receivables, add the decrease in inventories, and add the increase in payables.
This gives cash generated of 18,750 + 1,250 – 1,000 + 1,800 + 350 = 21,150.
Of this cash received, 8,000 was spent on non-current assets, which leaves 13,150 to increase the cash balance.
Im sorry , I don’t really get it . we have 21.150 , and we paid 8000 for NCA . what left s 13,150 . then the cash is decreased ? why is it increased ?
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