The following information is available for CANDY GH, a limited liability company: Statement of Profit or Loss and Other Comprehensive Income for the Year Ended 31st December, 2016 GH¢’000 Revenue 7,659 Cost of sales (5,442) Gross profit 2,217 Operating expenses (1,167) Operating profit 1,050 Interest expenses (150) Operating before tax 900 Tax expense (420) Net profit transferred to reserve 480 Statement of Financial Position as at 31st December: 2016 2015 GH¢’000 GH¢’000 ASSETS Noncurrent assets Property, Plant & Equipment Cost 22,160 1,785 Accumulated depreciation (1,020) (870) Carrying value 1,140 915 Intangible assets 750 600 Investment properties Nil 75 Current assets 1,776 1,254 Inventory 450 306 Receivables 1,170 945 Cash 156 3 Total assets 3,666 2,844 EQUITY AND LIABILITIES Equity Stated capital 1,380 1,173 Retained earnings 780 540 Noncurrent liabilities 510 150 12% Debenture 510 150 Current liabilities Trade payable 381 357 Bank overdraft 255 294 Taxation 360 330 Equity and liabilities 3,666 2,844 Additional information: Equipment which had cost GH¢255, 000 and with a net book value of GH¢ 135,000 and was sold for GH¢96, 000 during the year. The cash proceeds of the sale of asset investments properties amounted to GH¢90,000. Dividends paid during the year amounted to GH¢240,000. Required: Prepare the company’s statement of cash flows for the year ended 31st December 2016, using the indirect method
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
QUESTION 2
The following information is available for CANDY GH, a limited liability company:
Statement of Profit or Loss and Other Comprehensive Income for the Year Ended 31st December, 2016
|
GH¢’000 |
|
|
Revenue |
7,659 |
|
Cost of sales |
(5,442) |
|
Gross profit |
2,217 |
|
Operating expenses |
(1,167) |
|
Operating profit |
1,050 |
|
Interest expenses |
(150) |
|
Operating before tax |
900 |
|
Tax expense |
(420) |
|
Net profit transferred to reserve |
480 |
|
2016 |
2015 |
||
|
GH¢’000 |
GH¢’000 |
||
|
ASSETS |
|||
|
Noncurrent assets |
|||
|
Property, Plant & Equipment |
|||
|
Cost |
22,160 |
1,785 |
|
|
|
(1,020) |
(870) |
|
|
Carrying value |
1,140 |
915 |
|
|
Intangible assets |
750 |
600 |
|
|
Investment properties |
Nil |
75 |
|
|
Current assets |
1,776 |
1,254 |
|
|
Inventory |
450 |
306 |
|
|
Receivables |
1,170 |
945 |
|
|
Cash |
156 |
3 |
|
|
Total assets |
3,666 |
2,844 |
|
|
EQUITY AND LIABILITIES |
|||
|
Equity |
|||
|
Stated capital |
1,380 |
1,173 |
|
|
|
780 |
540 |
|
|
Noncurrent liabilities |
510 |
150 |
|
|
12% Debenture |
510 |
150 |
|
|
Current liabilities |
|||
|
Trade payable |
381 |
357 |
|
|
Bank overdraft |
255 |
294 |
|
|
|
360 |
330 |
|
|
Equity and liabilities |
3,666 |
2,844 |
Additional information:
- Equipment which had cost GH¢255, 000 and with a net book value of GH¢ 135,000 and was sold for GH¢96, 000 during the year.
- The cash proceeds of the sale of asset investments properties amounted to GH¢90,000.
- Dividends paid during the year amounted to GH¢240,000.
Required:
Prepare the company’s statement of cash flows for the year ended 31st December 2016, using the indirect method
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