- 20 Marks
FA – Nov 2023 – L1 – Q4 – IAS 7: Statement of cash flows
Prepare a statement of cash flows for Oti Ltd for the year ended 31 March 2022, including a discussion on cash equivalents.
Question
Extracts from the financial statements for Oti Ltd for the year ended 31 March 2022 are as follows:
Statement of Profit or Loss for the year ended 31 March 2022
| Description | Amount (GHȼ) |
|---|---|
| Profit from operations | 752,960 |
| Interest payable | (60,420) |
| Profit before tax | 692,540 |
| Income tax | (210,400) |
| Profit for the year | 482,140 |
Statements of Financial Position as at 31 March
| Description | 2022 (GHȼ) | 2021 (GHȼ) |
|---|---|---|
| Non-current assets | ||
| Property, plant, and equipment | 1,480,000 | 1,297,570 |
| Current assets | ||
| Inventories | 440,000 | 295,000 |
| Trade receivables | 385,840 | 197,750 |
| Bank | – | 4,120 |
| Total assets | 2,305,840 | 1,794,440 |
| Equity and liabilities | ||
| Share capital | 640,800 | 540,200 |
| Retained earnings | 641,340 | 301,200 |
| Non-current liabilities | ||
| 10% Loan note | 604,200 | 604,200 |
| Current liabilities | ||
| Trade payables | 154,700 | 150,300 |
| Income tax payable | 204,600 | 198,540 |
| Bank overdraft | 60,200 | – |
| Total equity and liabilities | 2,305,840 | 1,794,440 |
Additional information:
i) The depreciation charged for the year was GHȼ200,000.
ii) Dividends of GHȼ142,000 were paid during the year.
iii) During the year, plant with an original cost of GHȼ450,000 and a carrying amount at the date of disposal of GHȼ315,000 was sold for GHȼ412,000, which was received in cash.
Required:
a) In accordance with IAS 7: Statement of Cash Flows, prepare a Statement of Cash Flows for Oti Ltd for the year ended 31 March 2022. (18 marks)
b) Explain what is meant by the term ‘cash equivalents’ in relation to cash flow statements. (2 marks)
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