The paper "Corporate Finance and Valuation" is a wonderful example of an assignment on finance and accounting. The decrease in expenses payable(10) The decrease in tax payable(480)2 220 Cash flow from operating activities22 080 Cash Flows from Investing Activities Interest received60 Payment for equipment(10 000) Cash flow from investing activities(9 940) Cash Flows from Financing Activities Proceeds from Share Issue4 000 The decrease in retained earnings(4 920) Net cash from financing activities(920) Net increase/decrease in cash held Cash at the beginning of the year5 200 Cash at the end of the year1 500 Question 3: (Students must show ALL calculations for question 3 or no marks will be awarded for this question) Calculations Accounts receivable (net) Closing inventory 5 200 – Opening inventory 4 500 = 700 Inventory Closing inventory 20 000 – Opening inventory 18 000 = 2 000 Prepaid expenses Closing prepaid expenses 1 650 – Opening prepaid expenses 800 = 850 Bank overdraft Closing bank overdraft 5 660 – Opening bank overdraft 0 = 5 660 Accounts payable Closing accounts payable 4 000 – Opening accounts payable 3 800 = 200 Expenses payable Closing expenses payable 780 – Opening expenses payable 790 = -10 Tax payable Closing tax payable 720 – Opening tax payable 1 200 = -480 Share capital Closing share capital 30 000 – Opening share capital 26 000 = 4 000 Retained earnings Closing retained earnings 18 190 – Opening retained earnings 23 110 = -4 920 Question 3: b The cash flow statement is prepared based on the cash method.
It records the actual amount of money that the company received or spent in the reporting period. The profit is determined based on the accrual method. The profit indicates a company's ongoing sustainability whereas cash-flow measures the company's capability to pay its bills as they become due. That’ s why the cash-flow is the closing cash balance realized after taking away the cash paid from the cash received.
The profit is the amount left after taking away the period’ s expenses from the period’ s revenue. Question 3: c The cash flow statement shows the exact sources of a company's cash and the manner in which the money was used in the reporting period. The other statements do not show the sources of cash, they just indicate the value of items at the end reporting period. Also, the cash flow statement records the company’ s financial position like earnings and disposals/sale of the asset. On the other hand, the income statement indicates the company's revenues, gains, expenses, and losses but does not include cash receipts or cash disbursements.
The balance sheet often includes what might be called the theoretical money such as money that is owed to the company but not yet collected, while the cash flow statement reports money actually received or paid. The statement of changes in equity shows capital changes.
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