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The bank balance of a company increased by $750,000 during its last financial year.
During the same period it issued shares of $ 1 million and repaid loan notes of $750,000. It purchased non-current assets for $200,000 and charged depreciation of $100,000. Net current asset, i.e. current assets minus current liabilities (other than the bank balance) increased by $575,000
What is its profit for the year?Please do not simply set test questions and expect an answer. You must have an answer in the same book in which you found the question, so ask about whatever it is in the answer that you are not clear about and then I will explain.
This question is testing your knowledge of Statements of Cash Flows. You know the change in the bank balance, you know the cash flows from financing activities and the cash flows from investing activities – so you can work backwards and calculate the cash flows from operating activities.
Once you know the cash flows from operating activities, you can adjust for the increase in net current assets to calculate the profit.
If you are unsure about Statement of Cash Flows, then watch my free lectures on them. The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
Sir, I came across this question in a compiled practice book which doesnt have answers and is not sorted topically which is why I struggled with this particular question.. I wouldve been specific about my doubt otherwise.
Anyways, Thanks a lot!! I will watch the lecture since I haven’t studied this topic before. I had this question under bank reconciliation.
You are welcome 🙂
(However, it is pointless to attempt questions for which you do not have answers – how will you know if you have done them correctly? You must buy a Revision Kit from one of the ACCA approved publishers. They are full of exam standard questions, together with answers and explanations.)
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