Use the information provided below to prepare the Cash Flow Statement of Umhlali Limited for the year ended 31 December 2020. INFORMATION The following Information was extracted from the records of Umhlali Limited for the past two years: STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER: 2020 (R) 2019 (R) Sales 1 856 000 1 200 000 Cost of sales (1 280 000) (750 000) Gross profit 576 000 450 000 Operating expenses (291 200) (212 000) Depreciation 30 000 26 000 Other operating expenses 261 200 186 000 Operating profit 284 800 238 000 Interest on mortgage loan (24 000) (72 000) Profit before tax 260 800 166 000 Company tax (90 240) (58 100) Profit after tax 170 560 107 900 vmc Information extracted from the Statement of Financial Position for the past two years: STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER: 2020 (R) 2019 (R) ASSETS Non-current assets 2 464 160 2 444 000 Fixed assets 2 464 160 2 444 000 Current assets 356 000 336 000 Inventories (all Trading inventory) 120 000 250 000 Accounts receivable 40 000 64 000 Cash & cash equivalents 196 000 22 000 2 820 160 2 780 000 EQUITY AND LIABILITIES Equity 2 437 560 1 980 000 Ordinary share capital 2 180 000 1 760 000 Retained income 257 560 220 000 Non-current liabilities 200 000 600 000 Mortgage loan (12% p.a.) 200 000 600 000 Current liabilities 182 600 200 000 Accounts payable 98 000 138 000 SARS (Company tax) 8 600 6 000 Shareholders for dividends 76 000 56 000 2 820 160 2 780 000 Additional information ■ The issue price of all the shares is R10 each. New shares were issued on the first day of the financial year. ■ Interim and final dividends for the year ended 31 December 2020 amounted to R133 000. ■ Fixed assets were sold at carrying (book) value during the year for R144 000. Fixed assets were also purchased.
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.
Use the information provided below to prepare the Cash Flow Statement of Umhlali Limited for the year ended 31 December 2020.
INFORMATION
The following Information was extracted from the records of Umhlali Limited for the past two years:
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER:
2020 (R)
2019 (R)
Sales
1 856 000
1 200 000
Cost of sales
(1 280 000)
(750 000)
Gross profit
576 000
450 000
Operating expenses
(291 200)
(212 000)
30 000
26 000
Other operating expenses
261 200
186 000
Operating profit
284 800
238 000
Interest on mortgage loan
(24 000)
(72 000)
Profit before tax
260 800
166 000
Company tax
(90 240)
(58 100)
Profit after tax
170 560
107 900
vmc
Information extracted from the
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER:
2020 (R)
2019 (R)
ASSETS
Non-current assets
2 464 160
2 444 000
Fixed assets
2 464 160
2 444 000
Current assets
356 000
336 000
Inventories (all Trading inventory)
120 000
250 000
40 000
64 000
Cash & cash equivalents
196 000
22 000
2 820 160
2 780 000
EQUITY AND LIABILITIES
Equity
2 437 560
1 980 000
Ordinary share capital
2 180 000
1 760 000
Retained income
257 560
220 000
Non-current liabilities
200 000
600 000
Mortgage loan (12% p.a.)
200 000
600 000
Current liabilities
182 600
200 000
Accounts payable
98 000
138 000
SARS (Company tax)
8 600
6 000
Shareholders for dividends
76 000
56 000
2 820 160
2 780 000
Additional information
■
The issue price of all the shares is R10 each. New shares were issued on the first day of the financial year.
■
Interim and final dividends for the year ended 31 December 2020 amounted to R133 000.
■
Fixed assets were sold at carrying (book) value during the year for R144 000. Fixed assets were also purchased.
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