Preparation of Cash Flow Statements

Lecture Illustration 11.1

Required:
Prepare a statement of cash flows for the year ended 30th June 2004 in accordance with
AASB 107;
Prepare the note to the above statement reconciling net cash flows from operating
activities with operating profit.

The balance sheet figures for T Tango for the last two years are:

T Tango
Comparative Balance Sheets
1st July 2003 30th June 2004
Assets $ $ $ $
Cash at Bank 6,700
Accounts Receivable 9,000 10,300
Inventory 26,000 30,000
Plant & Equipment 13,000 20,000
Less Acc'd depreciation 5,000 8,000 6,000 14,000
Land 40,000 30,000
Buildings 30,000 30,000
Less Acc'd depreciation 10,000 20,000 12,000 18,000
Total Assets 103,000 109,000
Liabilities
Accounts payable 20,000 24,000
Bank overdraft 8,000
Proprietorship
T Tango - Capital 75,000 85,000
103,000 109,000
The Statement of Financial Performance for the year ended 30th June 2004 reveals the
following details:
T Tango
Income Statement for year ended 30th June 2004
$ $
Revenue
Sales 42,000
Cost Of Goods Sold
Cost of Goods Sold 24,000
Gross profit 18,000
Miscellaneous Revenue
Gain on sales of land 10,000
28,000
Expenses
Depreciation of plant & equipment 3,000
Depreciation of buildings 2,000
Loss on sale of plant 1,000
Other expenses 5,900 11,900
Operating Profit 16,100

Additional information:

During the year ended 30th June 2004, T Tango withdrew $50 per week for 52 week
for private use.
Tango also drew a personal cheque on the business to pay his income tax of $3,500.
Land shown in the accounts at $10,000 was sold during the year for $20,000.
Plant costing $5,000 and written down by $2,000 was sold for $2,000.

Working Papers:
 T Tango - Working Papers

Accounts Receivable
Post Amount Post Amount
Date Details Ref $ Date Details Ref $

Balance 9,000 *Bank 40,700

Sales 42,000 Balance 10,300
51,000 51,000
Balance c/d

Inventory
Post Amount Post Amount
Date Details Ref $ Date Details Ref $

Balance 26,000 COGS 24,000

#Purchases 28,000 Balance 30,000
54,000 54,000
Balance c/d 30,000

Accounts Payable
Post Amount Post Amount
Date Details Ref $ Date Details Ref $

**Bank 24,000 Balance 20,000

Balance 24,000 #Purchases 28,000
48,000 48,000
Balance c/d 24,000

Capital
Post Amount Post Amount
Date Details Ref $ Date Details Ref $
6,100
drawings Balance 75,000
Balance 85,000 Net profit 16,100
91,100 91,100
Balance c/d 85,000
 Plant
Post Amount Post Amount
Date Details Ref $ Date Details Ref $

Balance 13,000 WDV 5,000

#Bank 12,000 Balance 20,000
25,000 25,000
Balance c/d 20,000

Accumulated Depreciation - Plant

Post Amount Post Amount
Date Details Ref $ Date Details Ref $
2,000
Balance 5,000
Balance 6,000 dep 3,000
8,000 8,000
Balance c/d 5,000
 T Tango
Statement of Cash Flows for the year ended 30th June 2004
$ $
Cash Flow From Operating Activities

Cash receipts from customers 40,700

Cash paid to supplies and employees(24000+5900) (29,900)
Net increase in cash flows from operating activities 10,800
Cash flow From Investing Activities

Purchase of Property, plant and equipment (12,000)

Proceeds from sale of PP&E (20,000+2,000) 22,000
Net increase in cash. 10,000
Cash Flow From Financing Activities

Drawings paid (6,100)

Net decrease in cash (6,100)
Net increase in cash held 14,700
(8,000)
Cash at beginning of period
$6,700
Cash at end of period

Reconciliation of Net Cash Provided by Operating Activities to Operating Profit.

$

Operating Profit 16,100

Depreciation 5,000

Gain on sale of land (10,000)

Loss on sale of plant 1,000

Increase in accounts receivable (1,300)

Increase in inventories (4,000)

Increase in accounts payable 4,000

Cash provided by Operating Activities 10,800