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A business entity made an operating profit before tax of K8 000 but its bank balance has fallen by K5 000. This could be due to:
A. Depreciation of K6 000 and the repayment of a loan of K7 000.
B. The disposal of a non-current asset for K13 000 less than its carrying value.
C. Depreciation of K12 000 and the purchase of new non-current asset by cheque for K25 000.
D. Depreciation of K3 000 and an increase in inventories of K10 000.Please do not set me test questions and expect an answer. You must have an answer in whichever book you found the question, so ask about whatever it is in the answer that you are not clear about and then I will explain.
I suggest that you watch my free lectures on Statement of Cash Flow – then you will realise that the correct answer is C
The lectures are a complete free course for Paper FA (F3) and cover everything needed to be able to pass the exam well.
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