The following is the summarized statement of financial position Malover Ltd at 31 December 2019 and 2020: 31.12.20 31.12.19 Assets Sh. ‘000’ Sh. ‘000’ Freehold property at cost 380,000 360,000 Plant and machinery (net book value) 70,000 67,000 Furniture and fittings (net book value) 4,500 3,200 Investments --- 20,000 Stock 68,000 64,000 Debtors and prepaid expenses 79,000 68,000 Bank balance 41,000 18,000 Total assets 642,500 600,200 Equity and liabilities: Share capital (issued and fully paid shares of Sh20 each) 350,000 300,000 Share premium 32,500 40,000 8% redeemable preference capital (shares of Sh200 each) --- 100,000 Profit and loss account 33,000 29,000 10% debentures 30,000 --- Capital redemption reserve fund 50,000 --- Taxation 45,000 40,000 Proposed dividend 30,000 27,000 Trade creditors and accruals 72,000 64,000 Total equity and liabilities 642,500 600,200 Additional information The investments were disposed of for cash Sh. 19,800,000. Furniture and fittings with a net book of Sh. 200,000 were sold for cash Sh. 180,000. The preference shares were redeemed at a premium provided out pf the share premium account. Subsequently, 25,000 ordinary shares of Sh20 each were issued at a premium of 25%. On January 1st 2004, Malover Ltd. issued Sh. 3,000,000 10% debentures at Sh96 each for every Sh100 nominal. The discount arising from this issue was charged to the profit and loss account. The depreciation charged during the year was as follows: Plant and Machinery Sh. 21,400,000 Furniture and fittings Sh. 800,000 Required: Based on the Information given. Prepare Cash Flow Statement for the year ended 31 December 2020 in line with International Accounting Standard (IAS 7)
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.
The following is the summarized
31.12.20 31.12.19
|
Assets |
Sh. ‘000’ |
Sh. ‘000’ |
|
Freehold property at cost |
380,000 |
360,000 |
|
Plant and machinery (net book value) |
70,000 |
67,000 |
|
Furniture and fittings (net book value) |
4,500 |
3,200 |
|
Investments |
--- |
20,000 |
|
Stock |
68,000 |
64,000 |
|
Debtors and prepaid expenses |
79,000 |
68,000 |
|
Bank balance |
41,000 |
18,000 |
|
Total assets |
642,500 |
600,200 |
|
|
|
|
|
Equity and liabilities: |
|
|
|
Share capital (issued and fully paid shares of Sh20 each) |
350,000 |
300,000 |
|
Share premium |
32,500 |
40,000 |
|
8% redeemable preference capital (shares of Sh200 each) |
--- |
100,000 |
|
|
33,000 |
29,000 |
|
10% debentures |
30,000 |
--- |
|
Capital redemption reserve fund |
50,000 |
--- |
|
|
45,000 |
40,000 |
|
Proposed dividend |
30,000 |
27,000 |
|
Trade creditors and accruals |
72,000 |
64,000 |
|
Total equity and liabilities |
642,500 |
600,200 |
Additional information
- The investments were disposed of for cash Sh. 19,800,000. Furniture and fittings with a net book of Sh. 200,000 were sold for cash Sh. 180,000.
- The
preference shares were redeemed at a premium provided out pf the share premium account. Subsequently, 25,000 ordinary shares of Sh20 each were issued at a premium of 25%. - On January 1st 2004, Malover Ltd. issued Sh. 3,000,000 10% debentures at Sh96 each for every Sh100 nominal. The discount arising from this issue was charged to the profit and loss account.
- The
depreciation charged during the year was as follows:
|
Plant and Machinery |
Sh. 21,400,000 |
|
Furniture and fittings |
Sh. 800,000 |
Required:
Based on the Information given. Prepare Cash Flow Statement for the year ended 31 December 2020 in line with International Accounting Standard (IAS 7)
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