Ias 07

Statement of Cash Flow: (IAS-7)
While preparing statement of financial position and statement of comprehensive income we use accrual basis of
accounting. In accrual basis of accounting;
Incomes are recorded when they are earned whether or not received; and
Expenses are recorded when they are incurred whether or not paid.
However in a statement of cash flow information to users are provided on the basis of cash concept. Therefore
always consider cash flow statement just like a receipt & payment account in a statement form.
Receipt and payment A/c is a combined cash and bank A/c. e.g
Receipts and Payments
b/d 10,000 b/d 2,000 (Bank O/D)
Receipts 500,000 Payments 400,000
(Bank OD) c/d 12,000 c/d 120,000
A simplified cash flow statement from this receipt and payment account can be prepared as follows:
Receipts 500,000
Payments (400,000)
Net cash flow 100,000
Opening Balance (10,000 – 2,000) 8,000
Closing Balance (120,000 – 12,000) 108,000
Important points to remember:

• If there is no opening and closing balances of debtors then sale should be equal to receipt.
• If there is no opening and closing balances of creditors then purchase is equal to payment.
• If there is no opening and closing balances of stock then purchase is equal to cost of sales in a trading
organization.
• If there is no opening and closing balances of prepaid expenses or expenses payable then it means expense is
equal to payment.
• If there is no opening and closing balances of dividend payable then it means dividend declared is equal to
dividend paid.
Example:
Opening balance of advance tax is 70,000
Opening balance of income tax payable is 100,000
Current tax expense for the period 800,000
Closing balance of advance tax is 50,000
Closing balance of income tax payable is 120,000
Required:
Calculate the tax paid during the period.
Sir Hasan Marfani (ACA)

Solution
Advance Tax + Tax Payable
b/d 70,000 b/d 100,000
Cash (Bal) 760,000 Tax expense 800,000
c/d 120,000 c/d 50,000
Conclusion
Always prepare separate ledger of every expense payable or prepaid expense however;
If there is no breakup of expense into prepaid expense ledger and expense payable ledger then we can prepare a
combined ledger of prepaid expense and expense payable to calculate balancing figure of payment.
-------------- Cash flow format -----------

[Indirect method]
Company name
Statement of cash flows
For the year ended ------------

EXAM NOTES:
1. Increase / decrease in debtors can be calculated in one of the following two ways:
(a) Movement in gross debtors (as done in above format)

= closing gross debtors + bad debt written off during the year – opening gross debtors
(b) Movement in net debtors
= closing debtors (net of provision) – opening debtors (net of provision)
Tips:
• • If (b) is used then bad debt expense line will not appear in adjustments to profit before tax
• • (a) is more practically used treatment however (b) is also acceptable in exams
2. Changes in all current assets and current liabilities are shown in this section except for followings:
(i) cash and cash equivalents
(ii) tax assets and liabilities
(iii) Dividend payable and receivable
(iv) Interest payable and receivable
(v) Any other asset or liability which is shown under investing or financing activities e.g. short term finance,
investment, payable for purchase of a PPE and current portion of loan etc.
Above items may be hidden in other current assets or liabilities (e.g. interest payable may be hidden in
“accrued expenses”). In this case exclude above items first while calculating working capital changes.

Q.1 The following data relates to Shahnawaz Sports (Private) Limited for the year ended June 30,
2007 2006
Particulars
Rs. Rs.
Inventory 230,000 185,000
Prepaid expenses 14,000 16,000
trade debtors 52,000 30,000
Cash 15,000 38,000
Accounts payable 39,000 44,000
Income tax payable 5,000 4,000
Sales 500,000
Cost of sales 310,000
Operating expenses 80,000
Interest expenses 21,000
Taxation 30,000
Depreciation - included in operating expenses 6,000
included in cost of goods sold 6,000
Profit before tax 89,000
Required:
What will be the net cash flow from operating activities for the year ended 30.06.2007 as under?
(i) Direct method
(ii) Indirect method
Answers of practice questions
A.1 i) Direct Method

Shahnawaz Sports (Pvt) Limited
Statement of Cash Flow
For the year ended June 30,2007
Cash flow from Operating Activities:

Cash received from debtors 478,000
Cash paid to suppliers (354,000)
Expenses paid (72,000)
Cash generated from Operations 52,000
Interest paid (21,000)
Taxes Paid (29,000)
Net cash from Operating Activities 2,000
Debtors Accounts Payable
b/d 30,000 Cash 478,000

Cash 354,000 b/d 44,000
Sales 500,000 c/d 52,000c/d 39,000 Purchase 349,000
Inventory
b/d 185,000 Cost of sales (3106) 304,000
Prepaid Expense
Purchas 349,000 c/d 230,000 b/d 16,000 Expenses 74,000
e cash 72,000 c/d 14,000
Taxation Payable
Cash 29,000 b/d 4,000
c/d 5,000 Tax 30,000
ii) Indirect Method

Shahnawaz Sports (Pvt) Limited
For the year ended June 30,2007
Depreciation 12,000
Interest Expense 21,000
Operating Profit before working capital 122,000
Changes in working capital:
Prepaid Expense 2,000
Inventory (45,000)
Debtors (22,000)
Accounts Payable (5,000)
Cash generated from operations 52,000
Interest Paid (21,000)
Tax Paid (29,000)
Net cash from operating Activities 2,000

QUESTIONS
QUESTION NO. 1
Following balances have been extracted from balance sheets of a limited company as at:
June 30, 2017 June 30, 2016
-------------- Rs. -------------
Share capital 1,200,000 800,000
Share premium 200,000 120,000
Retained earnings 2,050,000 1,450,000
Dividend payable 75,000 50,000
Tax payable 32,000 26,000
Additional information:
1) Tax paid during 2017 was Rs. 42,500.
2) Dividend paid during 2017 was Rs. 100,000.
Required:
Calculate “cash inflow from issue of shares” and “profit before tax” for the year ended June 30, 2017.
QUESTION NO. 2
Dec 31, 2017 Dec 31, 2016
-------------- Rs. -------------
Property, plant and equipment 1,820,000 1,450,000
Revaluation surplus 163,000 140,000
Capital work in progress 270,000 550,000
Additional information relating to year 2017:

1) Depreciation for the amount to Rs. 425,000.
2) Transfer from revaluation surplus to retained earnings during the year was Rs. 15,000.
3) Expenditure of Rs. 140,000 was incurred on capital work-in-progress during the year.
4) During the year a machine costing Rs. 240,000 was sold at a profit of Rs. 18,000. Accumulated depreciation of
machine at the time of disposal was Rs. 75,000. There was no other disposal during the year.
Required:
Calculate “cash inflow from sale of PPE” and “cash outflow from purchase of PPE” for the year ending December 31,
2017.
QUESTION NO. 3
Dec 31, 2017 Dec 31, 2016
-------------- Rs. -------------
Share capital 310,000 250,000
Long term loan 225,000 200,000
Dividend payable 22,000 15,000
Additional information relating to year 2017:

1) Total principal repayments of loan made during the year were Rs. 55,000.
2) Dividend of Rs. 40,000 was declared during the year.
Required:
Prepare “cashflow from financing activities” section of cash flow statement for the year ended December 31, 2017.
QUESTION No. 4
Following information pertains to Dahl Limited (DL):
Summarised statement of financial position as at 31 December 2021
2021 2020 2021 2020
Rs. in million Rs. in million
Share capital 11.0 10.0 Property, plant and 18.7 10.6
equipment
Retained earnings 32.9 33.8 Working capital other than 24.5 17.8
cash
Revaluation surplus 4.0 - Cash 4.7 15.4
47.9 43.8 47.9 43.8
(i) Final dividend was paid in respect of year 2020 amounting to Rs. 3.4 million.
(ii) Additions to property, plant and equipment during the year amounted to Rs. 14 million.
(iii) Tax expense for the year amounted to Rs. 2.4 million. Tax payable as at 31 December 2021 amounted to Rs. 1
million (2020: Rs. 0.2 million)
Required:
Prepare DL’s statement of cash flows for the year ended 31 December 2021. (08)
[Spring 2022, Q-2]
QUESTION No. 5
Following are the extracts from the financial statements of Saguaro Limited (SL) for the year ended 30 June 2021:
Statement of financial position as on 30 June 2021
2021 2020 2021 2020

Assets Rs. in million Equity & liabilities Rs. in million
Operating fixed assets 820 848 Share capital (Rs. 10 700 500
each)
Accumulated depreciation (300) (262) Share discount (40) -
Capital WIP 84 - Retained earnings 220 315
Inventories 274 245 Long term loans 175 210
Trade receivables 177 204 Trade payables 180 130
Insurance claim - 31 Accrued expenses 48 43
Advance to supplier 78 60 Current portion of loans 43 40
Cash and bank balances 193 112
1,326 1,238 1,326 1,238
Statement of comprehensive income for the year ending 30 June 2021
Rs. million
Sales 757
Cost of sales (485)
Gross profit 272
Operating expenses (310)
Gain on disposal of equipment 17
Loss before interest (21)
Other information:
(i) SL declared a final dividend of 10% on 30 September 2020 which was paid in December 2020.
(ii) 20 million shares were issued in May 2021.
(iii) Insurance claim was related to plant and machinery destroyed in April 2020. The plant had cost and book value of
Rs. 63 million and Rs. 42 million respectively.
(iv) During the year, SL disposed of equipment having cost and net book value of Rs. 75 million and Rs. 35 million
respectively.
(v) Current portion of long-term loans include accrued interest of Rs. 5 million. (2020: Rs. 1 million) (vi) Trade
payables include an amount of Rs. 14 million payable against capital work in progress.
Required:
Prepare SL’s statement of cash flows for the year ended 30 June 2021. (16)
[Autumn 2021, Q-6]
QUESTION No. 6
Statement of financial position of Taxila Limited (TL) as on 30 June 2020 is as follows:
2020 2019 2020 2019

Property, plant and equipment 1,619 1,200 Share capital (Rs. 100 1,200 800
each)
Investment property 290 120 Share premium 290 150
Stock in trade 205 180 Retained earnings 260 90
Trade receivables 342 291 Revaluation surplus 215 200
Prepayments & other receivables 14 20 Long term loans 367 445
Short term investment 60 48 Trade & other payables 144 120
Cash and bank balance 24 6 Current maturity of loan 78 60

2,554 1,865 2,554 1,865
(i) Equipment having fair value of Rs. 240 million was acquired by issuing 2 million shares.
(ii) As a result of revaluation carried out on 30 June 2020, property, plant and equipment was increased by Rs. 80 million
out of which Rs. 35 million was credited to profit and loss account.
(iii) During the year, fully depreciated items of property, plant and equipment costing Rs. 36 million were sold for Rs. 8
million out of which Rs. 3 million is still outstanding.
(iv) Depreciation on property, plant and equipment for the year amounted to Rs. 290 million.
(v) An investment property was acquired for Rs. 180 million. TL applies cost model for subsequent measurement of its
investment property.
(vi) Financial charges for the year amounted to Rs. 45 million. Trade and other payables include accrued financial
charges of Rs. 12 million (2019: Rs. 17 million).
(vii) Short-term investments amounting to Rs. 35 million are readily convertible to cash (2019: Rs. 20 million). Investment
income for the year amounted to Rs. 6 million. Required:
Prepare TL’s statement of cash flows for the year ended 30 June 2020 in accordance with the requirements of IFRS. (17)
[Autumn 2020, Q-6]
QUESTION No. 7
You are working as Finance Manager in Broad Peak Limited (BPL). Faraz has recently joined BPL as an internee for
three months. You have asked him to develop an understanding of the statement of cash flows. After going through
few statements, he has raised the following queries:
(i) Depreciation is not a cash flow but was still appearing as an addition in the statement of cash flows.
(ii) In the statement of cash flows of a competitor, interest paid was shown as a financing activity but BPL showed it in
operating activities.
(iii) BPL purchased inventories throughout the year but total purchases of inventory were not shown in the statement.
However, only decrease in inventory was added.
(iv) Cash and bank balance in the statement of financial position was not in agreement with the opening and closing
balances at the end of statement of cash flows. Required:
Briefly answer the queries raised by Faraz. (08)
[Spring 2020, Q-2]
QUESTION No. 8
Following are the extracts from the financial statements of Sunday Traders Limited (STL) for the year ended 30 June
2019: Statement of financial position as on 30 June 2019
2019 2018 2019 2018
Property, plant and equipment 8,555 7,240 Share capital (Rs. 10 4,650 3,450
each)
Investment property 1,800 1,120 Share premium 1,600 1,240
Stock in trade 4,800 4,500 Retained earnings 1,652 (655)
Prepayments 184 268 Long term loans 6,024 6,523
Trade receivables 3,800 3,600 Trade payables 3,422 5,390
Cash 194 480 Contract liability 250 40
Accrued liabilities 310 180
Interest payable 135 110
Current maturity of loan 850 700
Provision for taxation 440 230
19,333 17,208 19,333 17,208
Statement of profit or loss for the year ended 30 June 2019
Rs. in million
Sales 29,700
Cost of sales (15,750)
Gross profit 13,950
Distribution cost (6,185)
Administrative cost (2,302)
Other income 404
Profit before interest and tax 5,867
Interest expense (1,210)
Tax expense (1,150)
Profit after tax 3,507
(i) 72% of sales were made on credit.
(ii) Depreciation expense for the year amounted to Rs. 750 million which was charged to distribution and
administrative cost in the ratio of 3:1.
(iii) Distribution cost includes:
• Rs. 40 million in respect of loss on disposal of equipment. The written down value at the time of disposal
was Rs. 152 million.
• impairment loss on vehicles amounting to Rs. 24 million.
(iv) Loan instalments (including interest) of Rs. 1,984 million were paid during the year. (v) Other income
comprises of:
• increase in fair value of investment property amounting to Rs. 220 million.
• rent received from investment property amounting to Rs. 184 million.
(vi) During the year, STL issued right shares at premium. Required:
Prepare STL’s statement of cash flows for the year ended 30 June 2019 using direct method. (19)
[Autumn 2019, Q-5]
QUESTION NO. 9
Junior Accountant of Drum Limited has prepared the following statement of cash flows for the year ended 31 December
2018:
Rs.’000
Cash flow from operating activities
Increase in retained earnings 1,360
Increase in dividend payable 200
Increase in net trade receivables (100)

Increase in interest accrued 50
1,510
Cash flow from investing activities
Increase in land and building (2,600)
Increase in equipment (1,550)
Decrease in inventory 400
Decrease in tax payable (60)
(3,810)
Cash flow from financing activities
Increase in share capital and premium 2,350
Decrease in long term loan (1,000)
Increase in trade and other payables 600
1,950
Decrease in cash balance during the year (350)
Opening cash balance 450
Closing cash balance 100
Junior Accountant informed you that he has taken the difference of opening and closing balances of each balance sheet
item and classified each difference as either operating, investing or financing cash flows. He further informed that the
statement is tied up with the cash balances appearing in the balance sheet. He has ignored the following information:
(i) Depreciation on building and equipment amounted to Rs. 480,000 and Rs. 810,000 respectively.
(ii) During the year, an equipment costing Rs. 560,000 and having a book value of Rs. 310,000 was sold for Rs.
440,000.
(iii) Provision for doubtful debts was increased by Rs. 140,000.
(iv) Dividend amounting to Rs. 700,000 was paid during the year.
(v) Interest and tax expenses for the year amounted to Rs. 378,000 and Rs. 650,000 respectively.
(vi) Trade and other payables as at 31 December 2018 included Rs. 950,000 for purchase of land and building.
Required:
Prepare statement of cash flows for the year ended 31 December 2018, in accordance with IAS 7 ‘Statement of Cash
Flows’ using indirect method. (14)
(Spring 2019 Q.7)
QUESTION NO. 10
Following information pertains to Nadir Limited:
Extract from statement of profit or loss for the year ended 31 December 2017
Rs. in ‘000
Profit before taxation 8,955
Taxation (2,945)
Profit after taxation 6,010
Extract from statement of financial position as on 31 December 2017

2017 2016 2017 2016
Equity and liabilities Assets
--- Rs. in ‘000 --- ---- Rs. in ‘000 ---
Share capital 12,400 10,000 PPE – net book value 21,400 15,800
Share premium 1,400 - Current assets:
Retained earnings 13,450 12,440 Stock-in-trade 5,600 5,750
Surplus on revaluation 4,000 - Trade receivables – net 6,840 4,446
Non-current liabilities: Other receivables 2,385 800
Long-term loans 4,100 5,000 Cash & bank 2,355 3,204
Current liabilities:
Trade payables 1,900 1,400
Accruals & other payables 680 660
Tax liability 650 500
38,580 30,000 38,580 30,000
Other information:
(i) Shares issued during the year were as follows:
• 10% bonus shares in March 2017.
• Right shares in July 2017.
(ii) During the year, a plant costing Rs. 9,500,000 and having a book value of Rs. 5,200,000 was disposed of for Rs.
4,800,000 of which Rs. 1,800,000 are still outstanding.
(iii) Depreciation for the year amounted to Rs. 7,350,000.
(iv) Financial charges for the year amounted to Rs. 1,100,000. Accrued financial charges as on 31 December 2017
amounted to Rs. 112,000 (2016: Rs. 48,000).
(v) Provision for doubtful trade receivables is maintained at 5%.
Required:
Prepare statement of cash flows for the year ended 31 December 2017, in accordance with IAS 7 ‘Statement of Cash
Flows’ using indirect method. (15)
(Spring 2018 Q.3)
QUESTION NO. 11
Following are the extracts from the financial statements of Universal Limited (UL) for the year ended 30 June 2017:
2017 2016 2017 2016
Assets Rs. in ‘000 Equity & liabilities Rs. in ‘000
Property, plant and 158,500 120,000 Share capital (Rs. 10 175,000 150,000
equipment each)
Stock in trade 58,000 45,000 Retained earnings 54,434 21,500
Trade receivables 68,000 56,000 Revaluation surplus 10,000 -
Cash 39,434 48,000 Debentures (Rs. 100 18,000 20,000
each)
Interest payable 1,000 2,500
Accrued liabilities 20,000 18,000
Unearned maintenance 2,000 4,000
Provision for taxation 1,500 14,000
323,934 269,000 323,934 269,000

Statement of profit or loss for the year ended 30 June 2017
Rs. in '000’
Sales 273,000
Cost of sales (187,500)
Gross profit 85,500
Operating expenses (46,766)
Other income 11,200
Profit before interest and tax 49,934
Tax expense (15,000)
(i) 60% of sales were made on credit.
(ii) UL maintains a provision for doubtful receivables at 6%. During the year, trade receivables of Rs. 7 million were
written off.
(iii) Depreciation expense for the year was Rs. 22.5 million. 70% of the depreciation was charged to cost of sales.
(iv) Other income comprises of:
 gain of Rs. 3 million on disposal of vehicles for Rs. 12 million;
 maintenance income of Rs. 8 million; and
 discount of Rs. 10 per debenture which were redeemed during the year.
Required:
Prepare UL’s statement of cash flows for the year ended 30 June 2017 using direct method. (15)
(FAR II Q-1, Autumn 2017)
QUESTION NO. 12
The statement of financial position of Liaquat Limited as at 31 December 2016 is as follows:
2016 2015 2016 2015
Equity and liabilities ------- Rupees ------- Assets ------- Rupees -------
Share capital 9,200,000 9,000,000 Freehold land 4,778,400 6,600,000
Share premium 1,346,832 1,000,000 Building – WDV 5,057,600 4,171,200
Retained earnings 3,391,228 3,665,280 Vehicle – WDV 600,000 800,000
Long term loan 1,000,000 1,000,000 Equipment – WDV 1,643,100 2,112,000
Short term loan 1,331,200 1,531,200 Capital WIP 1,478,400 1,821,600
Accounts payable 417,120 694,320 Long term deposits 580,800 448,800
Accrued interest 105,600 63,360 Inventory 685,608 320,628
Accounts receivable 1,273,272 595,452
Cash 694,800 84,480
16,791,980 16,954,160 16,791,980 16,954,160
The following information has been extracted from income statement:
Rupees

Depreciation expenses 932,500
Finance cost 141,872
Gain on sale of fixed assets (net) 98,960
Net profit before tax 1,525,948
(i) Details of gain on sale of fixed assets are as follows:
Rupees
Gain on sale of freehold land 168,960
Loss on disposal of equipment due to fire (70,000)
98,960
The loss on disposal of equipment represents the WDV of the equipment. The amount of insurance claim
received, amounting to Rs. 30,000 was erroneously credited to accumulated depreciation.
(ii) Repairs to building amounting to Rs. 50,000 were erroneously debited to building account on 31 December 2016.
(iii) Transfers from capital work in progress to building amounted to Rs. 1,200,000.
Required:
Prepare statement of cash flows for the year ended 31 December 2016, in accordance with IAS – 7 using indirect
method.
(12)
{Spring 2017, Q # 6}
QUESTION NO. 13
Following are the extracts from income statement of Quality Engineering Limited (QEL) for the year ended 31 December
2015 and its statement of financial position as at that date, together with some additional information: Income
statement for the year ended 31 December 2015
Rs. In
‘000’
Profit from operations 6,402
Other income 1,357
Interest expense (100)
Income tax expense (1,376)
Profit for the year 6,283
Statement of financial position as at 31 December 2015

2015 2014 Assets 2015 2014
Equity and liabilities
--- Rs. In ‘000’--- Non-current assets --- Rs. In ‘000’---
Share capital 9,000 7,000 Property, plant and equipment 19,628 11,845
Share premium 5,219 3,703 Investments 7,645 6,498
Un-appropriated profit 10,652 6,697 27,273 18,343
Revaluation surplus 2,676 1,911
10% bank loan 6,000 -
Current liabilities Current assets
Trade and other 3,337 4,953 Inventories 4,642 3,073
payables
Income tax payable 1,300 994 Trade and other receivables 2,273 3,865
Bank overdraft - 27 Cash and bank 3,996 4
4,637 5,974 10,911 6,942
38,184 25,285 38,184 25,285
(i) During the year, movements in property, plant and equipment include:
• Depreciation amounting to Rs. 5,280,000.
• Machinery having a carrying amount of Rs. 2,481,000 was sold for Rs. 3,440,000.
• Factory building was revalued from a carrying amount of Rs. 5,963,000 to Rs. 8,000,000.
• An office building which had previously been revalued, was sold at its carrying amount of Rs.
2,599,000. (ii) Cash dividends paid in December 2015 and November 2014 were Rs. 3.6 million and Rs.
2.4 million respectively.
(iii) Trade debts written off during the year amounted to Rs. 200,000. The provision for bad debts as at 31 December
2015 was Rs. 400,000 (2014: Rs. 550,000)
(iv) The interest on bank loan is payable on 30th June every year. The bank loan was received on 1 November 2015.
Interest for two months has been accrued and included in trade and other payables.
(v) Other income includes investment income of Rs. 398,000. As at 31 December 2015, trade and other receivables
included investment income receivable amounting to Rs. 96,000 (2014: Rs. 80,000).
Required:
Prepare a statement of cash flows for QEL for the year ended 31 December 2015, using the indirect method.
(18)
{Spring 2016, Q # 6 amended}
QUESTION No. 14
(a) List the elements of financial statements. (02)
(b) Following is the draft balance sheet of XYZ Limited as at 31 December 2014 which was prepared by its accountant:
Rs. in Rs. in
Assets Equities and liabilities
million million
Leasehold land – cost 250 Capital 1,000
Leasehold land – acc. depreciation (200) Accumulated profit 1,816
Building – cost 1,000 Long term bank loan 200
Building – acc. depreciation (500) Trade payables 228
Machinery – cost 1,750 Income tax payable 85
Machinery – accumulated (1,150) Accrued interest 13
depreciation
Long term deposit 70
Stocks 910
Account receivables – net of provision 361
Cash and bank 851
3,342 3,342
(i) Profit before tax and income tax expenses for the year amounted to Rs. 275 million and Rs. 13 million
respectively.
(ii) Balances as at 31 December 2013 were as under:

Rs. in million
Stock 703
Account receivables – net of provision 418
Cash and bank 243
Trade payables 150
Income tax payable 80
Long term deposit 70
The company follows a policy of maintaining provision for bad debts equal to 5% of account receivables.
(iii) The bank loan was obtained on 1 January 2014 and carries interest @ 9% per annum.
(iv) XYZ uses straight line method for depreciation. Rates of depreciation are as under:
Leasehold land 2%
Building 5%
Machinery 10%
Full month’s depreciation is provided in the month of acquisition but no depreciation is charged in the
month of disposal. Depreciation for the year 2014 has already been provided.
On review the CFO has discovered the following:
• A machine with list price of Rs. 50 million was purchased on 1 January 2014. An amount of Rs. 30
million had been paid in cash whereas Rs. 20 million were adjusted against trade-in of a machine
costing Rs. 40 million and having a book value of Rs. 25 million. The transaction was recorded by
debiting the plant and machinery account by Rs. 30 million i.e. the net amount paid to the
supplier.
• One of the company's customers became bankrupt during the year. Rs. 5 million out of total debt
of Rs. 25 million were recovered from him. Balance has to be written off.
Required:
Prepare a statement of cash flow as at 31 December 2014. (20)
{Spring 2015, Q # 4}
QUESTION No. 15
Sky Limited (SL) commenced its business on 1 July 2013 by purchasing the business of Moon Enterprises for a
consideration of Rs. 60 million. The following information has been extracted from its financial statements for the year
ended 30 June 2014.
Particulars Debit Credit

Rs. in million
Sales 172
Cost of sales 80
Operating and selling expenses 40
Bad debt expense 6
Loss on settlement of insurance claim 2
Finance charges paid 8
Taxation expense 15
Closing stock in trade 10

Trade receivables 28
Provision for doubtful debts 6
Trade payables 20
Provision for taxation (net of payments) 1
Property, plant and equipment - WDV 105
(i) At the time of acquisition, the assets and liabilities were valued as under:
Rs. in
million
Property, plant and equipment 52
Stock in trade 4
Trade receivables 8
Trade payables 12
(ii) During the year, SL incurred a capital expenditure of Rs. 70 million.
(iii) Loss on settlement of insurance claim relates to a car which was destroyed in an accident. Its cost and written
down value at the time of accident was Rs. 5 million and Rs. 4 million respectively. There were no other disposals
during the year.
Required:
Prepare operating activities section of the statement of cash flows for the year ended 30 June 2014 using the direct
method in accordance with the International Financial Reporting Standards. (11)
QUESTION No. 16
Galaxy Limited commenced its business on 1 January 2013 by issuing shares as follows:
• Rs. 50 million against cash
• Rs. 25 million against purchase of building
• Rs. 1.4 million against purchase of vehicle
Following is the summarised Trial Balance for 1st year as of 31 December 2013:
Debit Credit
Particulars
Rs. in million
Sales 136.00
Cost of sales (including depreciation expense of Rs. 9 million) 83.50
Operating and selling expenses (including depreciation expense of Rs. 6.25 37.30
million)
Miscellaneous income (net of loss of Rs. 0.35 on settlement of total loss 0.50
claim)
Finance charges 2.50
Taxation expense 6.00
Cash and bank balances 5.00
Bank overdraft 23.00
Accounts receivable 18.00
Provision for doubtful debts 0.90
Closing inventory 10.00

Accounts payable 14.00
Interest payable 1.20
Provision for taxation (net of payments) 1.00
Share capital 76.40
Dividend paid 2.45
12% Long term loan payable 25.00
Property, plant and equipment 128.25
Accumulated depreciation 15.00
293.00 293.00
Settlement of the insurance claim pertained to an accident of a new car costing Rs. 1.8 million and having a depreciation
charge of Rs. 0.25 million for the period in use. No bad debts were written off during the year.
Required:
Prepare a statement of cash flow for the year ended 31 December 2013. (13)
QUESTION No. 17
The following balances were extracted from the financial statements of Spanish Limited for the years ended 30 June
2012 and 2013.
2013 2012
---------Rs. in 000--------
-
Sales 60,000 40,000
Interest expense 27 30
Profit after tax 7,800 4,800
Property, plant and equipment – cost 10,000 9,000
– accumulated depreciation 1,000 900
Stock in trade 6,970 6,800
Trade debtors 9,000 8,000
Provision for doubtful debts 500 360
Trade creditors 5,000 4,700
Accrued expenses 300 -
Interest payable 12 14
Income tax payable 55 38
Additional information
• New machine costing Rs. 1,800,000 was purchased during the year. A machine with a carrying amount of Rs.
200,000 was sold for Rs. 250,000
• The tax rate applicable to the company is 35%. Required:

Prepare operating activities section of the statement of cash flows for the year ended 30 June 2013 using the Direct
Method. Show all necessary workings. (15)
QUESTION No. 18
A summary of revenues and expenses of AB Limited for the year ended 30 June 2013 is given below:

Rupees
Sales 2,345,000
Cost of goods manufactured and sold (1,624,000)
Gross profit 721,000
Selling, general and administrative expenses (509,000)
Net income before income tax 212,000
Income tax (90,000)
Net income 122,000
Net changes in working capital items for the year ended 30 June 2013 were as Net changes
follows: Dr. Cr.
Cash 32,000
Trade receivables (net) 74,000
Inventories 105,000
Prepaid expenses (selling and general) 6,000
Accrued expenses 15,000
Income tax payable 28,000
Trade payables 90,000
Depreciation for the year amounted to Rs. 68,000. Required:
Prepare a cash flow statement for the year ended 30 June 2013. (07)
{Autumn 2013, Q # 7 amended}
QUESTION No. 19
The balance sheet of Amin Limited as at 31 August 2011 is as follows:
2011 2010 2011 2010
-------- Rs.’000 ----- -------- Rs.’000 -----
Equity Fixed assets – book value 15,172 12,346
Retained earnings 17,983 17,942
33,433 27,942
Current liabilities Current assets
Short term finance 1,845 1,216 Investments 4,911 -
Creditors 3,457 2,850 Stock-in-trade 12,178 14,950
Dividend payable 700 400 Trade debts – net 6,732 4,887
Bank 442 225
6,002 4,466 24,263 20,062
39,435 32,408 39,435 32,408
The following information is also available: Rs.’000

Profit during the year ended 31 August 2011 3,161
Accumulated depreciation on fixed assets – 31 August 2010 5,605
Accumulated depreciation on fixed assets – 31 August 2011 7,470
Provision for bad debts – 31 August 2010 385
Provision for bad debts – 31 August 2011 484
During the year fixed assets costing Rs. 1,500,000 with a book value of Rs. 867,000 were sold for Rs.
1,284,000.
Required:
Prepare a cash flow statement for the year ended 31 August 2011. Show necessary workings. (13)
{Autumn 2011, Q # 2 amended}
QUESTION No. 20
Junaid Janjua Limited has provided you the following balance sheet and income statement. Balance
Sheet as on December 31, 2010
2010 2009
Rupees
Cash 145,000 32,000
Accounts receivable 280,000 104,000
Long-term investments 220,000 170,000
Inventory 424,000 200,000
Prepaid insurance 24,000 36,000
Office supplies 14,000 7,000
Land 1,810,000 2,500,000
Building 2,800,000 2,300,000
Accumulated depreciation (890,000) (720,000)
Equipment 1,200,000 1,150,000
Accumulated depreciation (380,000) (350,000)
Total assets 5,647,000 5,429,000
Accounts payable 158,000 263,000
Wages payable 40,000 24,000
Short-term loans 580,000 580,000
Long-term loans 985,000 1,160,000
Share capital 1,100,000 1,000,000
Retained earnings 2,784,000 2,402,000
Total liabilities and equity 5,647,000 5,429,000

Income Statement for the year ended December 31, 2010
Rupees
Sales revenue 9,280,000
Cost of goods sold (6,199,000)
Gross margin 3,081,000
Operating expenses
Selling expenses 634,000
Administrative expenses 1,348,000
Depreciation expenses 230,000
2,212,000
Income from operations 869,000
Other revenues/expenses
Gain on sale of land 64,000
Gain on sale of long term investment 32,000
Loss on sale of equipment (15,000)
81,000
Net income 950,000
Notes :
(a) Part of the long term loan amounting to Rs. 100,000 was settled by issuing ordinary shares.
(b) Long term investments costing Rs. 100,000 were sold during the year.
(c) Depreciation charged during the year on equipment amounted to Rs. 60,000. Equipment having a book value of
Rs. 75,000 was sold during the year. Required:
Prepare a cash flow statement for the year ended December 31, 2010. (14)
QUESTION No. 21
The balance sheets of Sakhawat Hussain Limited as at December 31, 2009 and 2008 are as follows:
Other information for the year 2009 is as follows:

(i) Investments costing Rs. 250,000 were sold for Rs. 320,000.
(ii) Fully depreciated furniture costing Rs. 200,000 was written-off.
(iii) Fixed assets costing Rs. 960,000 with a net book value of Rs. 160,000 were sold for Rs. 250,000.
(iv) Income tax amounting to Rs. 180,000 was paid in September 2009.
(v) Cash dividend amounting to Rs. 1,200,000 was paid during the year.
(vi) 20% of the opening and closing balances of current assets are represented by cash.
Required:
Prepare cash flow statement for the year ended December 31, 2009. (11)
QUESTION No. 22
The comparative balance sheets as at December 31st of Moosani Limited show the following information:
Additional data related to 2008 is as follows:

(i) Equipment that had costed Rs. 23,000 and was 40% depreciated at the time of disposal was sold for Rs.
6,500.
(ii) On January 1, 2008, the furniture was completely destroyed by a fire. Proceeds received from the
insurance company amounted to Rs. 60,000.
(iii) Investments were sold at Rs. 7,500 above their cost. (iv) Cash dividend amounting to Rs. 180,000 was
paid during 2008.
Required:
Prepare cash flow statement for the year ended December 31, 2008. (12)
QUESTION No. 23
Financial statements of Data Limited are as follows:
30 June 2018 30 June 2017
Rs “000” Rs “000”
Non-current assets
Fixed assets 161,300 160,500
Investments 20,500 12,200
Current assets

Stock in trade 34,200 36,600
Short term investments 1,500 2,300
Trade debts 25,500 18,700
Prepayments 2,700 3,000
Cash and bank 4,100 - 249,800 233,300
Equity and liability
Share Capital 66,000 56,000
Revaluation reserve – land & Building 8,000 3,000
174,100 142,900
Non-current liabilities
Bank loan 20,300 22,500
Government grant 10,000 -
Current liabilities
Government grant 2,000 -
Accrued expenses 23,000 28,800
Overdraft - 4,000
249,800 233,300
(i) Provision for doubtful debt at 30 June 2018 was Rs 1.2 million (2017: Rs 1.7 million).
(ii) During the year total payment of 7.6 million was made to bank against loan (including interest).
(iii) Dividend of Rs. 36 million was declared and paid during the year.
(iv) Government grant recognized as income for the year amounts to Rs. 2.5 million.
(v) Interest and tax expense for the year was Rs. 3.5 million and Rs 20.1 million respectively.
(vi) Accrued expenses include interest payable of Rs 1.1 million (2017: Rs 0.4 million) and tax payable of Rs 4.5 million
(2017: Rs 3 million).
(vii) Following is the details of fixed assets:
30 June 2018 30 June 2017
Rs “000” Rs “000”
Land and building 88,700 85,200
Plant and machinery 65,600 67,300
Intangibles 7,000 8,000
161,300 160,500
Renovation of building of Rs 3 million was capitalized during the year. Depreciation expense of land & building
and plant and machinery was Rs 4.5 million and 6.5 million respectively for the year just ended. Few machines
having net book value of Rs. 5,200,000 were sold at profit of Rs 500,000.
Required:
Prepare statement of cash flows using indirect method as per IAS-7 for 2018. (15)

SOLUTIONS
SOLUTION TO QUESTION NO.1
W-2 Retained earnings

Rs. Rs.
b/d
1,450,000
Dividend Profit for the year
125,000 725,000
c/d
2,050,000
2,175,000 2,175,000
Dividend payable
Rs. Rs.
Payment b/d
100,000 50,000
c/d Dividend declared
75,000 125,000
175,000 175,000
Tax payable
Rs. Rs.
Payment b/d 26,000

42,500
c/d Tax expense 48,500
32,000
74,500
74,500

PBT = 725,000 + 48,500 = Rs. 773,500

Rs.
Purchase of PPE [W-1]
502,000
Sale of PPE [240,000 - 75,000 +
18,000] 183,000
W-1 PPE
Rs. Rs.
b/d Disposal [240 - 75]

1,450,000 165,000
Transfer from Depreciation
CWIP 420,000 425,000
Revaluation c/d
38,000 1,820,000
Cash addition
(bal) 502,000
2,410,000 2,410,000
Capital WIP
Rs. Rs.
b/d Transfer
550,000 420,000
Expenditure 140,000 c/d 270,000
690,000 690,000
Revaluation surplus
Rs. Rs.
Transfer to RE b/d
15,000 140,000
c/d Revaluation
163,000 38,000
178,000 178,000

W-2 Loan
Rs. Rs.
Repayment c/d 55,000 b/d
200,000
W-3 225,000 New
loan 80,000 Dividend payable
280,000
280,000
Rs. Rs.
Payment b/d
33,000 15,000
c/d Dividend declared
22,000 40,000
55,000 55,000

Saguaro Limited
Statement of cash flows for the year ended 30 June 2021
Rs. in
million
Cash flows from operating activities
Loss for the year 315–50(500×10%)–220 (45)
Adjustments for:
Depreciation on property, plant and equipment 300+40(75–35)–262 78
Interest expense 45–21 24

Gain on disposal of property, plant and equipment (17)
Operating profit before working capital changes 40
Increase in inventory 274–245 (29)

Decrease in trade receivables 177–204 27
Increase in advance to supplier 78–60 (18)
Increase in accrued expenses 48–43 5
Increase in trade payables (180–14) –130 36
21
Cash generated from operations 61
Interest paid 1+24–5 (20)

Net cash flows from operating activities 41

Cash flows from investing activities
Purchase of property, plant and equipment 70(84–14)+47(820+75– (117)

848)
Proceeds from disposal of property, plant & 31+52(35+17) 83
equipment
Net cash flows used in investing activities (34)
Cash flows from financing activities
Proceeds from issue of shares (700-500)–40 160

Repayment of long term loan (175+43–5)– (210+40– (36)
1)
Dividend paid 500×10% (50)
Net cash flows from financing activities 74
Net increase in cash and cash equivalents 81
Cash and cash equivalents at beginning of the year 112
Cash and cash equivalents at the end of the year 193

Taxila Limited
Statement of cash flows for the year ended 30 June 2020
Rs. in million
Profit (W-1) 140

Adjustments for:
Depreciation on property, plant and equipment 290
Depreciation on investment property 120+180–290 10

Gain on disposal of property, plant and equipment (8)
Revaluation gain (35)
Interest expense 45
Operating profit before working capital changes 442
Increase in inventory 205–180 (25)

Decrease in prepayments and other receivables (14–3)–20 9
Increase in trade receivables 342–291 (51)
Decrease in short-term investments (60–35)–(48–20) 3
Increase in trade and other payables (144–12)–(120– 29
17)
(35)
Interest paid 17+45–12 (50)

Net cash flows from operating activities 357
Purchase of property, plant and equipment (W-2) (389)

Purchase of investment property (180)
Proceeds from disposal of property, plant & equipment 8–3 5

Net cash flows used in investing activities (564)
Proceeds from issue of shares at premium (W-3) 300

Repayment of long term loan (367+78)– (60)
(445+60)
Net cash flows from financing activities 240
Net increase in cash and cash equivalents 33
Cash and cash equivalents at beginning of the year 6+20 26

Cash and cash equivalents at the end of the year 24+35 59
W-1: Profit for the year Rs. in million
Retained earnings – closing 260
Transfer from revaluation surplus 200+(80–35)–215 (30)

Retained earnings – opening (90)
140
W-2: Purchase of property, plant and equipment Rs. in million

Opening balance 1,200

Equipment acquired against issuance of shares 240
Revaluation surplus 80
Depreciation for the year (290)
Closing balance (1,619)
389
W-3: Issuance of shares at premium Rs. in million
Share capital and share premium – closing 1,200+290 1,490

Issuance of shares for property, plant and equipment (240)
Share capital and share premium – opening 800+150 (950)

300

(i) A statement of cash flows begins with net profit which is arrived after deducting depreciation expense. So
to convert the net profit into net cash flow the deduction of depreciation is reversed (i.e. added).
(ii) As per IAS 7, interest paid can be shown as either cash flow from financing activities or cash flow from
operating activities. Both classifications are correct as long as they are consistently applied by an entity.
(iii) A statement of cash flows begins with net profit which is arrived after deducting cost of sales. So to convert
the effect of cost of goods sold into outflow for purchases of inventory, change in inventory is adjusted i.e.
increase is deducted and decrease is added.
(iv) Statement of financial position shows cash and bank balances while the statement of cash flows ends with
cash and cash equivalents which may differ from cash and bank balances due to existence of bank overdraft
and short-term investments.

Sunday Traders Limited Statement of Cash Flows
For the year ended 30 June 2019
Cash flows from operating activities Rs. in million
Cash receipts from customers (W-1) 29,710

Cash receipts from tenants 184
Cash paid to suppliers (W-2) (18,018)

Cash paid to other vendors (W-3) (7,459)
Interest paid 110+1,210–135 (1,185)

Income taxes paid 230+1,150–440 (940)
Net cash inflow from operating activities 2,292
Purchase of property, plant and equipment (8,555–7,240)+24+152+750 (2,241)

Proceeds from disposal of property, plant and 152–40 112
equipment
Purchase of investment property (1,800–1,120)–220 (460)
Net cash outflow from investing activities (2,589)
Proceeds from issue of shares (4,650–3,450)+(1,600–1,240) 1,560

Dividend paid 1,652+655–3,507 (1,200)
Repayment of loans 1,984–1,185 (799)
New loans acquired (6,024–6,523)+799+(850–700) 450
Net cash inflow from financing activities 11
Net decrease in cash and cash equivalents (286)
Cash and cash equivalent at the beginning of the year 480
Cash and cash equivalent at the end of the year 194
Workings:
W-1: Cash receipts from customers – Rs. in million
sales
Sales for the year 29,700
Increase in trade receivables 3,600 – 3,800 (200)
Increase in contract liability 250 – 40 210
Cash received from customers 29,710
W-2: Cash paid to suppliers Rs. in million
Cost of sales 15,750
Increase in stock balances 4,800–4,500 300
Decrease in trade payable 5,390–3,422 1,968

balances
Cash paid to suppliers 18,018
W-3: Cash paid to other vendors Rs. in million

Distribution cost 6,185
Administrative cost 2,302
Depreciation (750)
Loss on disposal (40)
Impairment (24)
Increase in accrued liabilities 180–310 (130)

balances
Decrease in prepayment balances 184–268 (84)
7,459

W-1: Profit before Tax
= 1,360 + 900 (W-2) + 650 = 2,910
W-2: Dividend for the year

= 200 + 700 = 900
W-3: Purchase of land and building

=2,600 + 480 – 950 = 2,130
Purchase of Equipment
= 1,550 + 310 + 810 = 2,670
Nadir Limited

For the year ended 31 December, 2017
Rs.000 Rs.000
Adjustments for:
Depreciation 7,350
Interest expenses 1,100
Loss on sale of property, plant & equipment (4,800 - 5,200) 400
Operating profit before working capital changes 17,805

(Increase) in net trade receivables (N -2) (2,394)
Decrease in inventories 150
Decrease in other receivables [800 - (2,385-1,800)] 215
Increase in trade payables 500
(Decrease) in accrued expenses (680-112)-(660-48) (44)

Interest paid (1,100 +48-112) (1,036)
Income tax paid (2,945+500-650) (2,795)
Dividend paid (N- 1) (W - 1) (4,000)
Net cash flows from operating activities 8,401
Rs.’000’ Rs.’000’
Cash flows from Investing Activities
Cash paid to acquire property, plant and equipment (W - 2) (14,150)
Cash received from disposal of property, plant (4,800 - 1,800) 3,000
Net cash flows from investing activities (11,150)

Issue of shares [12,400 + 1,400 - (10,000 x 1.1)] 2,800
Repayment of borrowings (900)
Net cash flows from financing activities 1,900
Net (decrease) in cash and cash equivalents (849)
Cash and cash equivalents at beginning of the year 3,204

Cash and cash equivalents at end of the year 2,355
Notes:
1) Dividend paid can be shown in financing activities
2) Alternatively provision for doubtful debts can be adjusted separately and increase in gross debtors will be shown here
W-1 Retained earnings Rs.'000

Less: Bonus Shares (10,000 x 10%) (1,000)
Less: Dividend paid (Balancing figure) (4,000)
Closing balance 13,450
W-2 Property, plant & equipment

Revaluation surplus 4,000
Addition (Cash) (Balancing figure) 14,150
Less: Disposal (5,200)
Less: Depreciation (7,350)
Closing balance 21,400

Universal Limited Cash flow statement
for the year ended June 30, 2017
Cash flow from operating activities Rs.'000’ Rs.'000’

Receipt from customers [W-1] 253,234
Payment to suppliers [W-2] (181,750)
Maint. Income received [2 + 8 – 4] 6,000
Payment for operating expenses [W-3] (30,250)

Finance cost paid [2.5 + 2 - 1] (3,500)
Tax paid [W-4] (27,500)
Cash inflow from operating activities 16,234

Purchase of PPE [W-5] (60,000)
Sale of PPE 12,000
Cash outflow from investing activities (48,000)

Issue of shares [175 - 150] 25,000
Redemption of debentures [W-6] (1,800)
Cash inflow from financing activities 23,200
Net cash outflow during the year Cash & (8,566) cash
48,000
equivalent at start of year Cash & cash 39,434
equivalent at end of year -
W-1 Customers
b/d Rs.'000 Rs.'000
Sales 59,574 Receipts 253,234 7,000
273,000 (bal.)
Write off
c/d 72,340
332,574 332,574
W-2 Suppliers
Rs.'000 Rs.'000 39,000
Payments (bal.) 181,750 b/d
c/d 42,000 Purchases 184,750
223,750 223,750
Inventory
b/d Rs.'000
Rs.'000
Purchases (bal.) 45,000 COS [187.5 - 22.5 x 70%] 171,750
184,750 c/d 58,000
229,750 229,750
W-3 Operating expenses

Rs.'000 Rs.'000 18,000
Payments (bal.) 30,250 b/d
c/d 20,000 Exp. [W- 32,250
50,250 3.1] 50,250
W-3.1
Cash expenses = Operating exp - Dep - Bad debts [W-3.2]
= 32,250
W-3.2 Prov. for bad debts

Rs.'000
Rs.'000
Write off
7,000 b/d 3,574
c/d 4,340 Exp. (bal.) 7,766 11,340
11,340
W-4 Tax
Rs.'000 Rs.'000
Payments (bal.) 27,500 b/d 14,000
c/d 1,500 Expense 15,000
29,000 29,000
W-5 PPE
b/d Rs.'000 Rs.'000
Revaluation 120,000 Disposal [12 - 3] 9,000
10,000 Depreciation
22,500
Addition (bal.) 60,000 c/d 158,500
190,000 190,000
W-6 Rs.'000
Other income 11,200
Gain on vehicle (3,000)
Maintenance income (8,000)
Discount on redemption [A] 200
Total redemption payment [A x 90/10] 1,800


Quality Engineering Limited
For the year ended 31 December 2015
Sale of machinery 3,440

Sale of office building 2,599
Purchase of PPE [W-1] (16,106)
Purchase of investment [7,645 - 6,498] (1,147)

Issue of shares [14,219 - 10,703] 3,516
Dividend paid (3,600)
New loan 6,000
Workings
W-1 PPE
Rs.'000’
Rs.'000’
b/d Depreciation 5,280
11,845

Revaluation Disposal 2,599
2,037
Addition Disposal 2,481
(bal.) 16,106
c/d 19,628
29,988
29,988
Only for cross check

Surplus
Rs.'000’ Rs.'000’
Transferred to RE 1,272 b/d 1,911
c/d 2,676 Building [8,000 - 2,037
3,948 5,963] 3,948
Unappropri
ated profit
Rs.'000’ Rs.'000’
Dividend 3,600 b/d 6,697
Transfer from surplus 1,272
Profit after
6,283
tax
c/d 10,652 14,252
14,252

(a) The element of financial statement are as under:
(i) The elements directly related to the measurement of financial position in the statement of financial
position are assets, liabilities and equity.
(ii) The elements directly related to the measurement of performance in the statement of comprehensive
income are income and expenses.
(b)

Sky Limited
Extracts from Statement of Cash Flows for the year ended 30 June 2014
Rs. in million

Cash receipts from customers (172 + 8 – 28) 152
Cash paid to suppliers (W.1) (78)
Cash paid for expenses (W.2) (27)
Interest paid (8)
Taxation paid (15 – 1) (14)
Net cash inflow from operating activities 25
W-1: Payments to suppliers:
Cost of sales 80
Increase in stock in trade (10 – 4) 6
Increase in trade payables (20 – 12) (8)
78
W-2: Payments for expenses:

Operating and selling expenses 40
Depreciation expense (52 + 70 – 4) – (13)

105
27

Galaxy Limited
Statement of cash flow for the year ended 31 December 2013
Rs. in million
Profit before taxation W.1 13.20
Adjustment for: Depreciation [9 + 6.25] 15.25

Finance charges 2.50
Bad debt expense 0.90
Loss on settlement of total loss claim 0.35
32.20

Closing balances: Account receivable (18.00)
Inventories (10.00)
Account payable 14.00
Cash generated from operations 18.20
Finance charges paid [2.5 – 1.2] (1.30)
Income taxes paid [6 – 1] (5.00)
Net cash from operating activities 11.90
Purchase of property, plant and equipment [128.25 – 25 – 1.4] + 1.8 (103.65)
Proceeds from the settlement of total loss claim [1.8 – 0.25] – 0.35 1.20
Net cash used in investing activities (102.45)
Issue of shares 50.00
Dividend paid (2.45)
Proceeds from long term loans 25.00
Net cash from financing activities 72.55
Net decrease in cash and cash equivalents (18.00)
Cash and cash equivalent at beginning of the -

period
Cash and cash equivalent at end of the period (23 – 5) (18.00)
W-1: Profit before taxation:
Sales 136.00
Cost of sales (83.50)
Operating and selling expenses (37.30)
Misc. income 0.50
Finance expenses (2.50)

13.20

Spanish Limited
Statement of Cash Flows
For the year ended 30th June 2013
2013
Cash flow from operating activities Rs.
Cash received from customers (W-1) 59,000,000
Cash paid to suppliers (W-2) (46,753,000)
Expenses paid ________-
Cash generated from operations 12,247,000
Interest paid (W-6) (29,000)
Income tax paid (W-7) (4,183,000)
Net cash from operating activities 8,035,000
{Working notes}
(W-1)
Debtors
Rs. Rs.
Balance b/d 8,000,000 Cash 59,000,000
Sales 60,000,000 Balance c/d _9,000,000
68,000,000 68,000,000
(W-2)
Creditors
Rs. Rs.
Cash (Balance) 46,753,000 Balance b/d 4,700,000
Balance c/d _5,000,000 Purchases (W-3) 47,053,000
51,753,000 51,753,000
(W-3)
Cost of goods sold = Opening stock + Purchases – Closing stock
46,883,000 (W-4) = 6,800,000 + Purchases – 6,970,000
Purchases = 46,883,000 + 6,970,000 – 6,800,000
Purchases = 47,053,000
(W-4) Rs.
Sales 60,000,000
Cost of sales (Balance) (46,883,000)
Gross profit 13,117,000
Accrued expenses (Note) (300,000)
Depreciation expense (W-5) (700,000)
Provision for doubtful debts (500,000 – 360,000) (140,000)
Gain on sale of asset (250,000 – 200,000) ___50,000
Profit before interest and tax 12,027,000
Profit before tax 12,000,000
Income tax expense (7,800,000 x 35 / 65) (4,200,000)
Profit after tax 7,800,000
(W-5)
Rs. Rs.
Asset sold (*800,000 – 200,000) 600,000 Balance b/d 900,000
Balance c/d 1,000,000 Depreciation (Balance) 700,000
1,600,000 1,600,000
*Property
pla nt & equipment
Rs. Rs.
Balance b/d 9,000,000 Sold (Balance) 800,000
Purchase 1,800,000 Balance c/d 10,000,000
10,800,000 10,800,000
(W-6)
Accumulated depreciation
Interest payable
Rs. Rs.
Cash (Balance) 29,000 Balance b/d 14,000
Balance c/d 12,000 Profit & loss 27,000
41,000 41,000
(W-7)
Taxation
Rs. Rs.
Cash (Balance) 4,183,000 Balance b/d 38,000
Balance c/d __55,000 Profit & loss (7,800,000 x 35 / 65) 4,200,000
4,238,000 4,238,000
Note: In absence of information about operating expenses, it is assumed that all expenses are to be paid as given in
accrued expenses.


Working
W-1
Fixed assets
Rs.'000 Rs.'000
b/d [12,346 + 5,605] 17,951 Disposal 1,500
Addition 6,191 c/d [15,172 + 22,642

7,470]
24,142 24,142

Rs.'000 Rs.'000
Disposal b/d 5,605

633
c/d Depreciation 2,498
7,470
8,103
8,103
W-2 Retained earnings

Rs.'000 Rs.'000
Dividend declared 3,120 b/d 17,942
c/d 17,983 Profit 3,161
21,103 21,103
Dividend payable
Rs.'000 Rs.'000
Paid 2,820 b/d 400
c/d 700 Declared 3,120
3,520 3,520

Junaid Janjua Limited
Cash flow statement
for the year ended December 31, 2010
----------- Rs. -----------
Cash flow from operating
activities
Add: Depreciation 230,000
Loss on sale of equipment 15,000
Less: Gain on sale of land (64,000)
Gain on sale of investment (32,000)
Operating profit 1,099,000
Increase in accounts receivable [280 - 104] (176,000)
Increase in inventory [424 - 200] (224,000)
Decrease in prepaid insurance [24 - 36] 12,000
Increase in office supplies [14 - 7] (7,000)
Decrease in accounts payable [158 - 263] (105,000)
Increase in wages payable [40 - 24] 16,000

Cash outflow from financing activities (643,000)
Net cash inflow during the year 113,000
Cash and cash equivalent at start of year 32,000
Cash and cash equivalent at end of year 145,000
Workings
W-1
Equipment
Rs. Rs.
b/d Disposal [75 + 30]

1,150,000 105,000
Addition (bal.) c/d
155,000 1,200,000
1,305,000 1,305,000
Acc. dep - equipment
Rs. Rs.
Disposal (bal.) b/d

30,000 350,000
c/d Charge for the year
380,000 60,000
410,000 410,000
W-2
Investment
Rs. Rs.
b/d Disposal
170,000 100,000
Addition (bal.) c/d
150,000 220,000

320,000 320,000
W-3
Retained earnings
Rs. Rs.
Dividend b/d
568,000 2,402,000
c/d Profit for the year
2,784,000 950,000
3,352,000 3,352,000

Working 1
Accumulated profits
Rs. Rs.
Cash dividend 1,200,000 b/d 900,000
c/d 1,100,000 PAT (balance) 1,400,000
2,300,000 2,300,000
PBT = PAT + tax expense (W-2)
=1,400,000 + 230,000 = 1,630,000
Working 2
Tax payable
Rs. Rs.
Paid 180,000 b/d 150,000
c/d 200,000 Tax expense (balance) 230,000
380,000 380,000
Working 3
Fixed assets
Rs. Rs.
b/d 9,600,000 Disposal 960,000
Addition 1,310,000 Write off 200,000
c/d 9,750,000
10,910,000 10,910,000
Rs. Rs.
Disposal [960 – 160] 800,000 b/d 2,450,000
Write off 200,000 Depreciation 1,500,000
c/d 2,950,000
3,950,000 3,950,000

Working 1
Accumulated profits
Rs. Rs.
Cash dividend 180,000 b/d 3,800
c/d 36,000 Profit 212,200
216,000 216,000
Working 2
Furniture
Rs. Rs.
b/d 64,000 Disposal 64,000
Addition 80,000 c/d 80,000
114,000 114,000
Acc. depreciation - furniture

Rs. Rs.
Disposal 15,000 b/d 15,000
c/d 8,000 Depreciation 8,000
23,000 23,000
Equipment
Rs. Rs.
b/d 43,000 Disposal 23,000
Addition 66,000 c/d 86,000
109,000 109,000

Acc. depreciation - equipment
Rs. Rs.
Disposal [23,000 x 40%] 9,200 b/d 18,000
c/d 24,000 Depreciation 15,200
33,200 33,200
Total depreciation = 8,000 + 15,200 = 23,200
Data Limited
For the year ended 30 June 2018
Rs “000” Rs “000”
Cash flow from operating activities
Profit before tax (W-1:52,200 + 20,100) 72,300
Add: Interest expense 3,500
Add: Depreciation (4,500 + 6,500) 11,000
Add: Amortization (8,000 – 7,000) 1,000
Less: Decrease in provision (1,200 – 1,700) (500)
Less: Grant income (2,500)
Less: Profit on sale of machine (500)
84,300
Add: Decrease in inventory (34,200 – 36,600) 2,400
Less: Increase in debtors (20,400-26,700) (6,300)
Add: Decrease in prepayments (3,000-2,700) 300
Less: Decrease in payables (35,100-20,400) (14,700)
Less: Decrease in accrued expenses (W-2) [17,400 – 25,400] (8,000)
Interest paid (W-3) (2,800)
Tax paid (W-4) (18,600)
Cash flow from investing activities Rs “000” Rs “000”

Cash received from disposal of machinery [5,200 + 500] 5,700
Cash paid for purchase of machinery (W-5) (10,000)
Cash paid for renovation (W-6) (3,000)
Cash received from govt. grant [10,000 + 2,000 + 2,500] 14,500
Cash paid for investments (20,500-12,200) (8,300)

Issue of shares (66,000 – 56,000) 10,000
Dividend paid (36,000)
Loan obtained (W-7) 2,600
Loan repaid (7,600-2,800) (4,800)
Cash outflow from financing activities (28,200)
Total cash generated from all activities 7,300
Add: Opening cash and cash equivalents (2,300–4,000) (1,700)
Closing cash and cash equivalents 5,600
(W-1) Retained earnings
b/d 83,900
Dividend 36,000 Profit (balancing) 52,200
c/d 100,100
136,100 136,100
(W-2) Accrued expenses 30 June 2018 30 June 2017
Rs “000” Rs “000”
Accrued expenses 23,000 28,800
Interest payable 1,100 400
Tax payable 4,500 3,000
Remaining 17,400 25,400
(W-3) Interest payable
b/d 400
Cash paid 2,800 Expense 3,500
c/d 1,100
3,900 3,900
(W-4) Tax payable
b/d 3,000
Cash 18,600 Expense 20,100
c/d 4,500
23,100 23,100

(W-5) Plant and machinery
b/d 67,300 Depreciation 6,500
Cash (bal.) 10,000 Disposal 5,200
c/d 65,600
77,300 77,300
(W-6) Land and building
b/d 85,200 Depreciation 4,500
Cash 3,000
Revaluation 5,000
c/d 88,700
93,200 93,200
(W-7) Bank loan
b/d 22,500
Cash paid (7,600-2,800) 4,800 Loan obtained β 2,600
c/d 20,300
25,100 25,100

Chapter 8: IAS 7: Statement of cash flows
6 OBJECTIVE BASED QUESTIONS

01. Faria Limited is involved in the business of furniture. At 1 January 2018 the company’s issued share
capital consists of 50,000 Rs. 1 shares. During the year 2018 company has made a bonus issue of 1 for
5 shares.
What is impact of bonus issue on cash flows of the business?
(a) Decrease in cash flows from operating activities
(b) Increase in cash flows from financing activities
(c) No impact
(d) Increase in cash generated from operations
02. A company has incurred a loss of Rs. 40,000 during the year 2018; however, the balance in the bank
account at end of the year is more than the balance at start of the year. What does this mean?
(a) Company has allowed a longer credit period to the credit customers
(b) Company has purchased more stock
(c) Company has made a right issue during the year
(d) Company has purchased fixed assets during the year
03. A company has provided the following information:

2018 2017
Rs. Rs.

A bonus issue of 1 for every 10 shares held has been made during the year.
What is the amount to be reported in cash flow from financing activities for the year 2018?
(a) Rs. 10,000 Inflow
(b) 0
(c) Rs. 10,000 outflow
(d) Cannot be determined
04. A company has provided following balances

Rs.
Non–current asset – 31 December 2018 125,000
Accumulated depreciation 1 January 2018 25,000
Accumulated depreciation 31 December 2018 38,000

During the year an asset having cost Rs. 10,000 was sold for Rs. 6,000 and gain on disposal
was Rs. 3,000.
What is the charge for depreciation for the year to be adjusted in statement of cash flows?
(a) Rs. 13,000
(b) Rs. 19,000
(c) Rs. 20,000

(d) Rs. 38,000
05. A company has provided following information as at 31 March 2019:
2019 Rs. 2018 Rs.
Following adjustments were made during the year 2019:
Dividends paid Rs. 5,000
Transfer to general reserves Rs. 12,000
Tax charge Rs. 4,000
What is the amount of profit before tax for the year 2019 for the purposes of preparing statement of cash flows?
(a) Rs. 29,000
(b) Rs. 33,000
(c) Rs. 24,000
(d) Rs. 25,000
06. A company has provided the following data:

Rs.
Receivables at 1 April 2018 12,000
Receivables at 31 March 2019 25,000
Credit sales during the year 75,000
Discount allowed during the year 3,000
What is the amount to be shown as cash received from customers in statement of cash flows using direct method?
(a) Rs. 62,000
(b) Rs. 75,000
(c) Rs. 59,000
(d) Rs. 65,000
07. Which TWO of the following are considered as inflows in a company’s statement of cash flows?
(a) Bonus shares issued
(b) Decrease in accounts receivables
(c) Increase in inventory
(d) Increase in accounts payables
08. Which of the following item will appear in cash flows from financing activities section of statement of cash
flows?
(a) Cash paid to acquire non-current assets
(b) Dividends paid
(c) Bonus shares issued
(d) Depreciation for the year
09. Following data is available for a company for the year ended 31 December 2018:
Rs.
Increase in accounts receivables 5,000
Increase in inventory 3,000
Increase in accounts payable 2,000
Interest paid 500
What is the net cash generated from cash flows from operating activities for the year ended 31 December 2018?
(a) Rs. 23,500
(b) Rs. 24,500
(c) Rs. 29,500
(d) Rs. 19,500
10. Which of the following is an advantage of statement of cash flows?

(a) It determines the profitability of a business
(b) It helps users to estimate the future expected cash flows of the business
(c) It determines the ratio of business debts and equity
(d) It helps in determining the net assets of a business
11. A company has made following investments during the year:

Rs.
6 months Advance rent paid to landlord 30,000
Short term investments bond (highly liquid) 25,000
Debentures purchased- redeemable after 7 years 50,000
Non–current assets purchased 45,000
What is the amount to be shown in investing activities for the year?
(a) Rs. 45,000
(b) Rs. 150,000
(c) Rs. 95,000
(d) Rs. 100,000
12. A company has provided following data at the end of year 2017:
2017 Rs.
Share capital Rs. 1 each 100,000
Share premium 3,000
The company has made a right issue of 1 for 5 shares during the year 2018 at Rs. 1.2 per share. What is the amount to
be shown in the cash flows from financing activities?
(a) Rs. 24,000 outflow
(b) Rs. 24,000 inflow
(c) Rs. 20,000 inflow
(d) Rs. 4000 inflow
13. How should gain on sale of used equipment be reported in a cash flow statement, using indirect approach?
(a) In operating activities as deduction from Profit before tax
(b) In investing activities as a reduction in cash inflow
(c) In investing activities as an increase in cash inflows
(d) In operating activities as addition to profit before tax
14. Which TWO of the following are added as non-cash adjustments to the profit before tax in the cash flow from
operating activities section of statement of cash flows?
(a) Interest expense
(b) Interest income
(c) Loss on sale of non–current assets
(d) Tax charge for the year
15. Where, in a company are financial statements complying with international accounting standards, should you
find the proceeds of non-current assets sold during the period?
(a) Statement of cash flows and statement of financial position
(b) Statement of changes in equity and statement of financial position
(c) Statement of profit or loss and statement of cash flows
(d) Statement of cash flows only
16. Zahid & Co. reported a profit Rs. 40,000 for the year, after charging the following:
Rs.
Depreciation 4,000
Loss on sale of assets 3,000
During the year there was a decrease in accounts receivables of Rs. 1,000.
What was the net cash flow generated from operations based on above data?
Rs. ___________
17. Asmat Limited made a profit for the year of Rs. 320,500, after accounting for depreciation Rs. 32,500. During the
year following transactions took place:
Rs.
Purchase of machinery 125,000
Increase in accounts receivables 45,000
Increase in inventory 28,000
What is the net increase in cash and bank balance during the year?
Rs. ___________
18. A company has provided following information:

Rs.
4% Loan notes 1,000,000
Interest payable 1 January 2018 10,000
Interest payable 31 December 2018 20,000
What is the amount to be reported as interest paid during the year 2018 in the Statement of Cash Flows?
Rs. ___________
19. Furqan Limited has provided following information about non–current assets:
Rs.
Cost as at 1 January 2018 350,000
Cost as at 31 December 2018 450,000
During the year an asset costing Rs. 100,000 and having net book value of Rs. 40,000 was sold at a profit of Rs. 30,000.
What is the net to be shown as outflow in the “Cash flow from investing activities” section in Statement of Cash Flows?
Rs. ___________
20. The following amounts have been calculated for inclusion in the statement of cash flow of House Limited:
Rs.
Net cash inflow from financing activities 145,000
Net cash outflow from investing activities 160,000
Increase in cash and cash equivalents 24,000
Income taxes paid 65,000
Interest paid 12,000
How much cash has been generated from operations?
Rs. ___________
21. A cash flow statement provides information that enables users to evaluate the changes in:
(a) Solvency
(b) Net assets
(c) Its financial structure
(d) Its liquidity
22. Daily sales and purchases and employee costs comprise:

(a) Operating activities
(b) Investing activities
(c) Financing activity
(d) Component of cash and cash equivalent
23. Which of the following involves a movement of cash?
(a) A rights issue
(b) Depreciation of fixed assets
(c) Creation of a provision for doubtful debts
(d) A bonus issue
24. Activities that result in changes in the size and composition of the equity capital and borrowings of an entity are
called:
(a) Operating activities
(b) Investing activities
(c) Financing activity
(d) None of these
25. Which of the following are not the operating activities?

(a) Interest paid
(b) Cash payments of income taxes
(c) Collections from customers
(d) Payment of dividends
26. Amplifier Limited had sales of Rs.120 million during the year. Trade and other receivables increased from Rs.12
million to Rs.16 million, an increase of Rs. 4 million. What amount of cash was received from customers during the year?
(a) Rs.124 million
(b) Rs.116 million
(c) Rs.120 million
(d) None of these
27. Cost of sales for Shah Textile Limited during the year was Rs.100 million. Opening inventory was Rs.20 million
and closing inventory was Rs. 28 million. Opening trade payables were Rs.5 million and closing trade payables were Rs.9
million. What amount of cash was paid to suppliers?
(a) Rs.102 million
(b) Rs.104 million
(c) Rs.108 million
(d) Rs.110 million
28. Zaman Limited extracted general ledger from which it shows salaries and wages expense of Rs.50 million during
the year. Its cash flow statement reported cash paid to employees of Rs.42 million. The opening balance of accrued
salaries and wages was Rs.3.6 million. What was the closing balance for accrued salaries and wages?
(a) Rs.11.6 million
(b) Rs.11.8 million
(c) Rs.4.4 million
(d) Rs.3.8 million
29. Sale proceeds from disposal of property, plant and equipment are classified as:
(a) Financing activities
(b) Operating activities
(c) Investing activities
(d) Either financing or operating activities, depending on which method (direct or indirect) is used to determine
cash flows from operating activities
30. Which one of the following events will increase the cash balances of a business?
(a) Loan repayment to banks
(b) Bank granting it an overdraft facility
(c) Debtors paying amounts owed
(d) Sale of stock on credit
31. A company with healthy profits is facing a cash shortage. Which of the following events could account for this?
(a) Delaying payments to creditors
(b) The shortening of the credit period granted to debtors
(c) The recent acquisition of machinery
(d) An increase in dividend proposed by the directors
32. Which one of the following companies is most likely to run into cash flow problems?
(a) A loss making company making components of vital strategic importance to the government
(b) A profitable new retailer about to embark on ambitious expansion plans
(c) A company which has recently sold part of its operations so as to concentrate on its core areas
(d) Reasonably profitable, long established company with no expansion plans
33. What is the immediate effect of making a capital repayment on a loan on cash flow and profits?
(a) On profit - None; On cash – Decrease
(b) On profit - Increase; On cash – Decrease
(c) On profit - Decrease; On cash – Decrease
(d) On profit - Decrease; On cash – None
34. A company has a negative cash flow from operating activities. What could explain this negative cash flow?
(a) High levels of dividend payments
(b) A substantial investment in new fixed assets
(c) A sudden increase in credit sales
(d) The repayment of a loan
35. Which of the following is NOT a cash outflow for the firm?
(a) Dividends
(b) Interest payments.
(c) Taxes
(d) Bad debts
36. Which of the following would cause negative net cash flow from operating activities?
(a) Decrease in depreciation expense
(b) A substantial investment in fixed assets
(c) A significant increase in credit sales
(d) Repayment of a long-term loan

OBJECTIVE BASED ANSWER
01. (c) Bonus issue of shares involves transfer from Reserves to share capital of the company.
There is no cash flow involved.
02. (c) The statement indicates that the company had net cash receipts (inflows) despite
the losses, which is indicative of receipts of cash by issuing right shares.
03. (b) No cash is paid or received for bonus issue of share capital. Entry to
record bonus issue
Dr CR
Rs. Rs.
Share premium 10,000

Share capital 10,000
Share Capital + Share premium

b/d 100,000+40,000 140,000
c/d
110,000 + 30,000 140,000
140,0000 140,000
04. (c)
Particulars Rs. Particulars Rs.
Disposal (see below) 7,000 b/f 25,000
c/f 38,000 Depreciation
45,000
Disposal
Asset 10,000 Provision for dep. 7,000

(balancing)
Gain on disposal 3,000 Cash
13,000

05. (b)
Retained earnings
Dividends paid 5,000 b/f 38,000
Transfer to reserves 12,000 Profit for the year 29,000
c/f 50,000
67,000 67,000
Profit after tax 29,000 + Tax 4,000 = Rs. 33,000 profit before tax
06. (c)
Accounts receivables
b/f 12,000 Cash (bal.) 59,000
Sales 75,000 Discount allowed 3,000

c/f
87,000
07. (b) & Decrease in accounts receivables indicates that they have paid the debt, hence,
(d) inflow for us.
Increase in accounts payable indicates that we have not paid them, thus reducing
outflows (or increasing cash flows) Bonus shares issued do not affect cash flows.
Increase in inventory is cash outflows.
08. (b) Dividend is paid to shareholders who provide finance to the business; therefore, it is
treated as financing activity.
Cash paid to acquire non-current assets is shown in investing activities.
Bonus issues have no impact on cash flows of the business.
Depreciation is non-cash item and is adjusted in operating activities.
09. (a)
Rs.
Increase in accounts receivables (5,000)
Increase in inventory (3,000)
Interest paid (500)
23,500
10. (b) Users of financial statements may predict future cash flows from past data of how
the entity generates and uses its cash.
Profitability is reflected in statement of comprehensive income.
Debt/Equity and net assets are reflected in statement of financial position.

11. (c) Only debentures and non – current assets purchased are included in investing
activities; Rs. 50,000+45,000= Rs. 95,000
Investment in short term bonds will be considered cash equivalent and advance rent
would affect operating activities cash flows.
12. (b) Shares issued = 100,000/5 = 20,000
Cash received = 20,000xRs.1.2= Rs. 24,000
13. (a) The gain on disposal in included in profit before tax as other income. This is deducted
back in order to determine the cash figure.
14. (a & Interest expense is added back as interest paid is separately reported.
c) Loss on disposal is added back as this is included in profit before tax as an expense.
Interest income is deducted back.
Tax charge need not be added back as already the amount taken is profit before tax.
15. (d)
16. Rs.
48,000
Rs.
Adjustments for non-cash items
Depreciation 4,000
Loss on sale of fixed assets 3,000

Decrease in accounts receivables 1,000
17. Rs.
167,600
Cash flows from operating activities Rs.
Depreciation 32,500

Increase in accounts receivables (45,000)
Increase in inventory (28,000)
292,600

Purchase of machinery (125,000)
167,600

18. Rs.
30,000
Interest payable
Cash 30,000 b/f 10,000
c/f 20,000 Interest expense
50,000
Interest expense = Rs. 1,000,000x4%= Rs. 40,000
19. Rs.
130,000Amounts to be shown in Cash flows from investing activities are;
Cash flows from investing activities Rs.

Cash paid to acquire assets (200,000)
Cash received on disposal 70,000
130,000
Non-current assets
b/f 350,000 Disposal 100,000
Cash 200,000 c/d
550,000
Disposal
Asset 100,000 Acc. Dep [100,000 – 60,000

40,000]
Gain on disposal 30,000 Cash
130,000
20. Rs. Rs.

116,000
Cash generated from operations (β) 116,000
Interest paid (12,000)
Income taxes paid (65,000)
Net cash from operating activities (β) 39,000

Net cash outflow from investing activities (160,000)
Net cash inflow from financing activities 145,000
Increase in cash and cash equivalents 24,000

21. (d)
22. (a)
23. (a)
24. (c)
25. (d)
26. (b)
27. (b)
28. (a)
29. (c)
30. (c)
31. (c)
32. (b)
33. (a)
34. (c)
35. (d)
36. (c) A significant increase in credit sales

Ias 07

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Ias 07

Uploaded by

Copyright:

Available Formats

Statement of Cash Flow: (IAS-7)

Important points to remember:

Sir Hasan Marfani (ACA)

-------------- Cash flow format -----------

Sir Hasan Marfani (ACA)

(a) Movement in gross debtors (as done in above format)

Sir Hasan Marfani (ACA)

Answers of practice questions

A.1 i) Direct Method

Cash flow from Operating Activities:

Debtors Accounts Payable

b/d 30,000 Cash 478,000

c/d 5,000 Tax 30,000

ii) Indirect Method

Sir Hasan Marfani (ACA)

Additional information relating to year 2017:

Additional information relating to year 2017:

Sir Hasan Marfani (ACA)

Statement of financial position as on 30 June 2021

2021 2020 2021 2020

Statement of comprehensive income for the year ending 30 June 2021

Statement of financial position as on 30 June 2020

2020 2019 2020 2019

Sir Hasan Marfani (ACA)

Sir Hasan Marfani (ACA)

Extract from statement of financial position as on 31 December 2017

Sir Hasan Marfani (ACA)

The following information has been extracted from income statement:

Sir Hasan Marfani (ACA)

Statement of financial position as at 31 December 2015

Sir Hasan Marfani (ACA)

Particulars Debit Credit

Sir Hasan Marfani (ACA)

Sir Hasan Marfani (ACA)

• The tax rate applicable to the company is 35%. Required:

Sir Hasan Marfani (ACA)

The following information is also available: Rs.’000

Cash 145,000 32,000

Accounts receivable 280,000 104,000

Long-term investments 220,000 170,000

Inventory 424,000 200,000

Prepaid insurance 24,000 36,000

Office supplies 14,000 7,000

Land 1,810,000 2,500,000

Building 2,800,000 2,300,000

Accumulated depreciation (890,000) (720,000)

Equipment 1,200,000 1,150,000

Accumulated depreciation (380,000) (350,000)

Total assets 5,647,000 5,429,000

Accounts payable 158,000 263,000

Wages payable 40,000 24,000

Short-term loans 580,000 580,000

Long-term loans 985,000 1,160,000

Share capital 1,100,000 1,000,000

Retained earnings 2,784,000 2,402,000

Total liabilities and equity 5,647,000 5,429,000

Sir Hasan Marfani (ACA)

Other information for the year 2009 is as follows:

Additional data related to 2008 is as follows:

Sir Hasan Marfani (ACA)

Sir Hasan Marfani (ACA)

W-2 Retained earnings

Payment b/d 26,000