STATEMENT OF CASHFLOWS [IAS 7]

Financial Statements

income statement of Statement of

statement Financial Position cashflows

statement of cash flows is a part of published financial statements and all those
companies which are required to publish their financial statements must include
statement of cash flows .

The statement measures changes occurring in cash and cash equivalent during the
year .
A shareholder need information regarding liquidity position of the business
and from where the cash is
generated and where it is used .

The word cash means cash which is readily and easily available on demand and
include cash in hand and deposits with bank repayable on demand ..

The word cash equivalent includes all the

highly liquid short term investments which
can be easily converted to cash without risk of significant fall or decrease in their value .

An investment m)
to be classified as cash equivalent must have a maturity of 90 days .

starting Point ingredients

Profit from operations or 2 consecutive years of statement of
- -

Profit before interest financial position

Current Years income statement

Activity
operating Activity
-

investing Activity
-

Financing Activity
 Non cash Expense Non cash Revenue
×
•

Depreciation .
Discount Received
•
Increase in Provision .

Decrease in Provision
×
°
Discount Allowed •

Gain on Disposal
•
Loss on Disposal
×
.
Bad Debts

Step Ii Non
.

cash
Adjustment
starting with profit from operations all non cash expenses will be added
to profit from operations and all non cash revenue will be deducted from

profit from operations in order to derive profit on cash basis .

Note : .

Discount allowed . received and bad debts will not be adjusted in non cash

adjustments as these are already adjusted in trade receivables .

Example I : '

calculation of depreciation expense and additions in non current assets .

2009 2008

Non current Assets -

cost 742,000 626,000
Provision for depreciation 288.000 202.000

During the year 2009 non current assets which cost $108000 was sold for $8000
at a loss of $16000 Calculate depreciation expense
.
for 2009 and additions in non
current assets .

Accumulated Depreciation of Disposal =

108000 -

C 16000 t 8000] '

$84,000
cost sale loss
proceed,

Non current Assets -

cost Provision for Depreciation
balance bid 626.000 Disposal 108.000 Disposal 84,000 balance bid 202,000

additions 224.000 Income Statement 170.000

balance old 742,000 balance old 288.000
850.000 850.000 372,000 372,000
2 .
2013 2014

Plant and 888,000

Machinery 106.900
Provision for Depreciation 762,000 864.000

year plant and accumulated depreciation of $62.500

During the
machinery with was

sold for $16.200 at a gain of $7.300 .

Cost of Disposal -
62,500 it [16.200-7.300]=471,400
acc dep Sale Gain
proceed
. .

Plant and Provision for Depreciation

machinery
balance bid 888.000 Disposal 71,400 Disposal 62.500 balance bid 762.000
additions 252,000 Income statement a 64.500

balance old 906,900 balance cld 864.000

1,140,000 d. 140,000 926,500 926,500

3 .
2009 2008

Non current Assets 960.000 1.520,000

Provision for depreciation 460,000 760,000

Non current Assets include freehold premises which cost $r62 000 with
. depreciation
of $32,000 revalued
during 201ha at $200.000 .

During the
year a non current asset

$80.000 With netbook Value of $24.000 sold at loss of $6000

costing was a .

Prepare journal entry to record revaluation of premises additions in

,
non current asset

die or

Premise ) 38.000
Depreciation HI 32,000
Revaluation Reserve (t ) 70.000
 Working capital movement

increase ca) in
inventory is treated as cash outflow
Decrease (A) in
inventory is treated as cash inflow
increase ca) in trade receivables is treated as cash outflow
Decrease (A) in trade receivables is treated as cash inflow
increase ca) in prepaid expenses is treated as cash outflow
Decrease (A) in prepaid expenses is treated as cash inflow
Treatment
* Increase in current asset =
cash outflow (H
* Decrease in current asset =
cash inflow t

-
in adjustment of working capital movement we will not take into account

increase or decrease of cash and cash equivalent .

Increase ca) in trade payable is treated as cash inflow

Decrease (A) in trade payable is treated as cash outflow
increase ca) in accrued expenses is treated as cash inflow
Decrease (A) in accrued expenses is treated as cash outflow

Assets and liabilities interests , taxation and dividends will not be

relating to
-

adjusted in these items are

working capital movement because
separately shown
in statement of cashflows .

Treatment
in current cash inflow
* Increase
liability =
it

Decrease
* in current
liability =
cash outflow (H
-
 Transaction Inflow Outflow
Activity
Dividends paid
d.
Financing
2. Purchase of Tangible Noncurrent Assets
Investing
3. Issue of share capital Financing

4. Depreciation expense operating fhtfyusfamsehnt

operating twmorokvienfnefft
'
5. Decrease in trade receivables

G. Dividend received
Investing
7. Takes Paid Operating

8. Receipt of loan
financing
9. Proceed from sale of non current asset
investing

too Redemption of share capital financing

ii. interest paid Operating

D. Interest received Investing

B. Gain on disposal Operating fhtfejusfamsehnt

Operating twmorokvienfnefft
'
iv. increase in trade payable

tis issue
.
of Debentures Financing
B. Rights issue
Financing
H Bonus
- Issue - - -

D8 . Revaluation reserve - - -

A. Transfer to
general reserve -

S T
Specimen Format : .

Statement of cash flows GAS 't ]

who ? ←
AP Ltd Statement of cashflow → What ?
for the year ended 31 Dec 2020 When ?
$ $

f¥ ÷ ¥ ÷
i.
Operatingactivity
Profit from operations xxx

NonCashAdjustme
Depreciation expense xxx

Loss I Gain on Disposal )

xxx k xxx

increase 1 Decrease in Provision xx xxxxx)

Workingcapitalmovement

:÷ ÷ ÷ ÷ ÷ ÷ ÷ ÷ ÷
Xxx K xxx)

: ÷ ÷ : ÷ ÷ ÷ : ÷ i ÷
i
: : iii.iii. .

Interest paid
tax Paid
Net cash Generated leased ) from xxxxx)
in
operating activities xx

2.
lnvestingactivity
Payment to acquire non current Asset (xxx)
Proceed from sale of non current Asset xxx
Purchase of Investment ( xxx )
Dividend received xxx
Interest received
Net cash Generated Mused in ) from investing activities xx xxxxx)
 -

$ $

'f*÷: ÷¥ :
3.
Financingttctivity
Issue of share capital ( issue value) xxx

Issue of Debenture xxx

Receipt of loan xxx

of Debenture (xxx )
"

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