Cash Flow Statement Exercise 1

1. The following is the Cash-at-Bank account of Rendezvous Partnership. It shows the cash transactions for the year 2012: Cash-at-Bank Jan 1 Balance Jan 12 Sales Feb 8 M. Vehicle Apr 12 Loan Jun 29 Interest rev. Jul 3 Debtors Aug 10 Capital $4570 $25900 $4500 $8500 $300 $4570 $10000 Jan 14 Feb 8 Mar 23 May 19 Jun 18 Aug 21 Sept 6 Oct 17 Nov 24 Dec 31 Drawings $13500 Inventory $7950 Loan $5500 Wages $2300 Machinery $8030 Selling Exp. $2240 Office Equip. $790 General Exp. $3200 Creditors $6830 Balance $8000 $58340

$58340

a) Based on the information above, prepare a cash flow statement for the business for the year ended 31 Dec 2012. b) Describe the overall cash position of the business and explain why the business cash has increased/decreased during the accounting period. c) Suggest 2 ways to improve the cash flow of the business (hint: look at the activities with negative net cash flow for clues).

Answer

1.(b) During the Year 2012, the business cash balance has increase from $4570 to $8000. This is due to net cash flow of operating activities which is $8250.

1.(c) 2 ways to improve the cash flow of the business are decrease in wages and add capital.

Trial Balance Exercise 4 Jim and Nancy Dornan are the owners of Network 21 Co., a business that sells training tools for personal developments. The following is their trial balance for the 6-month period that ended on 31st December 2012:
Accounts Sales Bad debt Capital Inventory Drawings Office expense Debtors Utility expense Land and Premises Accumulated Depreciation L&P Cost of Goods Sold Salesman Commission Sales Return Promotion Expense Cash at bank Motor Vehicle Accumulated Depreciation M.V. Interest expense Bank Loan Freight Inwards Creditor Prepaid Rent Revenue Accrued Interest Expense $ 900 52600 15780 1030 4500 35000 1740 85000 82600 6460 400 2960 5600 22000 3500 450 9700 $ 146000

6000 35000 14300 3420 900

Additional information 1) Motor vehicles are depreciated under the diminishing balance method at 25% p.a. 2) Land and premises are depreciated under the straight-line method (it has $5000 scrap value and a useful life of 40 years).

Prepare the P&L statement and balance sheet for the owner.

Answer