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INTRODUCTION
Profit v Cash
ST v LT
SCI v SFP
SCF
INTRODUCTION
Cash
Cash on hand and demand deposits
Cash equivalents
Short-term, highly liquid investments, readily
convertible to known amounts of cash and subject to
insignificant risk of changes in value
Cash flows
Cash + cash equivalents
Operating Activities
The principal revenue-producing activities and other activities
that are not investing or financing activities
Investing Activities
Acquisition and disposal of long-term assets and other
investments not included in cash equivalents
Financing Activities
Those that result in changes in the size and composition of the
equity capital and borrowings
INDIRECT METHOD
Depreciation charges
- Profit on disposal of equipment
- Increase in inventories
- Increase in receivables
+ Increase in payables
= cash generated from operations
+ Interest received*
- Interest paid*
- Tax paid
- Dividends paid*
= Net cash inflow from operating
activities
separately
Classified as operating, investing or financing
Disclosed separately
Other Issues
Exceptional
STEPS
Step 1:
Set up SCF headings. Leave plenty of space to insert detail.
Step 2:
Study additional information and mark with a cross those items
affecting SFP amounts.
Step 3:
Begin SCF by using SCI to work down to operating profit before
working capital changes.
Step 4:
Proceed line by line through SFP. If an item is not marked with a cross,
the difference may be entered direct to SCF; if it is marked, a working
is required. Use working ledger accounts to calculate missing figures.
Insert the opening and closing balances from SFP into the working
accounts, and then add information from the notes to complete the
ledger account. Balancing figures on the working accounts are then
transferred to SCF.
CCE LIMITED
1,800
____
1,800
100
200
200
500
100
400
500
1,000
120
1,120
Opening balance
1,910 Transfer disposal
80
Leases
900 Closing balance
3,730
Cash additions (bal)
1,000
_____
3,810
3,810
(W6) Property, Plant and Equipment Depreciation
Transfer disposal
60 Opening balance
1,060
Closings balance
1,450 SCI
450
1,510
1,510
(W7) Property, Plant and Equipment Disposal
Cost
80 Depreciation
60
__ Cash
20
80
80
Payments under FL
90 Opening balance
1,040
Closing balances
2,300 Finance leases
900
____ LT borrowing
450
2,390
2,390
(W9) Retained Earnings (to reconcile balances)
Dividend paid
1,200 Opening balance
1,380
Closing balance
3,410 SCI
3,230
4,610
4,610
CCE LIMITED
Statement of Cash Flows Year Ended 31st December 20X2
W
W
Net cash from operating activities
Cash flows from investing activities
Purchases of PPE
Proceeds of sale of equipment
Interest received
Dividends received
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from long-term borrowings
Payment of finance lease liabilities
Dividends paid
Net cash used in financing activities
Net increase in C&CEs
C&CEs at beginning of period
C&CEs at end of period
1,420
5 (1,000)
7
20
2
200
2
200
(580)
250
450
(90)
(1,200)
(590)
250
160
410
1,200
30,650
31,850
1,800
30,050
W
1
2
30,050
(27,640)
2,410
(270)
(720)
1,420