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    Cash Flow Statement 2019 HL Question Worked Solution

    Uploaded by

    Conor Murphy
    This document provides a worked example of preparing a cash flow statement. It includes 5 steps: 1) calculating changes in cash and net debt, 2) calculating tax, dividends, interest paid and investment income, 3) calculating adjustments to debtors, stock and creditors, 4) calculating changes to fixed assets and depreciation, and 5) calculating changes to the capital structure. It also provides notes on reconciling operating profit to net cash from operating activities and reconciling the net cash flow to the movement in net debt. The goal is to calculate the cash flow statement from the other financial statements and notes provided.

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    Cash Flow Statement 2019 HL Question Worked Solution

    Uploaded by

    Conor Murphy
    54 views5 pages
    This document provides a worked example of preparing a cash flow statement. It includes 5 steps: 1) calculating changes in cash and net debt, 2) calculating tax, dividends, interest paid and investment income, 3) calculating adjustments to debtors, stock and creditors, 4) calculating changes to fixed assets and depreciation, and 5) calculating changes to the capital structure. It also provides notes on reconciling operating profit to net cash from operating activities and reconciling the net cash flow to the movement in net debt. The goal is to calculate the cash flow statement from the other financial statements and notes provided.

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    Cash Flow Statement 2019 HL Q

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    This document provides a worked example of preparing a cash flow statement. It includes 5 steps: 1) calculating changes in cash and net debt, 2) calculating tax, dividends, interest paid and investment income, 3) calculating adjustments to debtors, stock and creditors, 4) calculating changes to fixed assets and depreciation, and 5) calculating changes to the capital structure. It also provides notes on reconciling operating profit to net cash from operating activities and reconciling the net cash flow to the movement in net debt. The goal is to calculate the cash flow statement from the other financial statements and notes provided.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    54 views5 pages

    Cash Flow Statement 2019 HL Question Worked Solution

    Uploaded by

    Conor Murphy
    This document provides a worked example of preparing a cash flow statement. It includes 5 steps: 1) calculating changes in cash and net debt, 2) calculating tax, dividends, interest paid and investment income, 3) calculating adjustments to debtors, stock and creditors, 4) calculating changes to fixed assets and depreciation, and 5) calculating changes to the capital structure. It also provides notes on reconciling operating profit to net cash from operating activities and reconciling the net cash flow to the movement in net debt. The goal is to calculate the cash flow statement from the other financial statements and notes provided.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 5

    Cash Flow Statement

    2019 HL Question

    Worked Solution

    1. Prepare the Abridged P and L Account.


    2. Get marks on the board
    3. Can do this without doing many of the steps!
    4. Just need to calculate the interest and investment income for the year

    Abridged Profit and Loss Account of Jackson PLC for the year ended 31/12/18

    Need to work backwards from Profit and Loss Account 31/12/18 figure

    €
    Operating Profit 79750
    Investment income 2400
    82150
    Less interest (7200)
    Profit before taxation 74950
    Taxation Additional info in q (51000)
    Profit after taxation 23950
    Less Dividends Additional info in q (30600)
    Retained Profit (6650)
    Profit and Loss Account 1/1/18 Last years B/S 42250
    Profit and Loss Account 31/12/18 This year’s B/S 35600
    Note 1: Debenture Interest

    8% of 80000 x 9/12 = 4800

    8% of 120000 x 3/12 = 2400

    Figure to Abridged P and L A/C = 7200

    Note 2: Investment Income

    6% of 40000 =

    Figure to abridged p and l ac= 2400

    Note 3: Dividends

    Ordinary shares: 510000 x 0.06 = 30600

    Figure to abridged p and l ac = 30600


    Step 1 Calculate the change in cash and change in net debt

    Opening Figures Closing Figures Change


    Bank Overdraft
    Cash
    Net Cash
    Debentures (minus)
    Government Securities
    Net Debt

    Step 2

    Calculate Taxation, Dividends, Interest Paid and Investment Income

    Item Opening Figure Add Less Amount


    This Year’s Closing Figure Paid/Received
    charge
    Taxation
    Dividends
    Interest
    Investment
    income

    Step 3

    Calculate adjustments for increase/decrease in Debtors, Stock and Creditors

    Item Opening Balance Closing Balance Change Treat as


    Debtors
    Provision for Bad
    Debts
    Creditors
    Stock

    Step 4

    (a) Fixed Assets

    Calculate the changes in Fixed Assets, including Depreciation

    Item Opening Figure Add Less Closing Figure


    (Opening Balance Any assets Any assets (Closing Balance
    Sheet) purchased during disposed of Sheet)
    the period during the period
    Fixed Asset
    Depreciation

    Profit/Loss on Sale of Fixed Assets

    Cost Price

    Less Depreciation to date

    Less Proceeds

    Loss on Sale

    Step 5

    Calculate the changes in the Capital Structure of the Firm

    Item Opening Figure Add Less Closing Figure


    (Opening Balance Any increase Any decrease (Closing Balance
    Sheet) during the period during the period Sheet)
    Capital
    Share Premium
    Debentures
    Liquid Resources

    Note 1: Reconciliation of Operating Profit to Net Cash Flow from Operating Activities

    Need to state whether there is an increase or decrease in the item in the narration

    €
    Operating Profit
    Depreciation charge for the year
    Decrease in Debtors
    Increase in Provision for Bad Debts
    Increase in Stock
    Loss on Sale of Fixed Assets
    Decrease in Creditors
    Goodwill written off
    Net Cash Inflow from Operating Activities
    Cash Flow Statement

    €
    Operating Activities
    Net Cash Inflow from Operating
    Activities
    Returns on Investment and
    Servicing of Finance
    Investment Income Received
    Interest Paid
    Taxation
    Taxation Paid
    Capital Expenditure and Financial
    Investment
    Payments to acquire tangible fixed
    assets
    Proceeds from the sale of fixed
    assets
    Equity Dividends Paid
    Equity Dividends Paid
    Net Cash Outflow Before Liquid
    Resources and Financing
    Management of Liquid Resources
    Purchase of government securities
    Financing
    Receipts from Issue of Debentures
    Receipts from Share Capital Issued
    Receipts from Share Premium
    Increase in Cash

    Note 2: Reconciliation of Net Cash Flow to Movement in Net Debt

    €
    Increase/Decrease in Cash (From Cash Flow
    Statement)
    Cash used to purchase liquid resources
    Cash received from issue debentures
    Change in Net Debt
    Net Debt 1/1/18 Step 1
    Net Debt 31/12/18 Step 1
    (b)

    (i) Non-cash items are items in the profit and loss account that affect profit, but do not
    affect the cash position
    Examples: Depreciation: 72000, increase in bad debt provision 400, goodwill written off 11000,
    loss on sale of fixed asset 1700

    (ii) The purchase of fixed assets decreases cash but does not affect profit
    OR
    The sale of fixed assets increases cash but does not affect profit
    OR
    Drawings reduce cash but has no effect on profit

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