TACC401 Principles of Accounting
Week 3: Cash flow Statement
Seminar Guide
Seminar Activity 3.1: Transactions and Financial Statements
I. Cover decided to open Recover Upholstery Repairs on 1 January 2018. She contributed office equipment valued at $10 000 and a commercial van valued at $12 000, and deposited $5 000 cash in a business bank account. Transactions during January were:
Jan 4 Took a three-year lease on a shop and paid the first month’s rent $350.
4 Purchased office supplies for $260, and issued a cheque for $100 in part payment for these supplies.
6 Cash received for minor repairs, $120.
6 Revenue earned for repair work for Shipshape Ltd on credit, $350.
7 Purchased an upholstery sewing machine for $1 840, paying $400 cash with the balance to be paid at a later date.
8 Cash revenue earned $230.
11 Engaged an upholsterer at an agreed wage of $350 per week.
12 Paid petrol $20, postage $10, and electricity bill $30.
13 Cash of $200 received for over-the-counter repairs
13 Revenue of $450 earned from sales to a customer on credit.
14 Paid the balance owing for office supplies purchased on 4th Jan 2018.
15 The owner withdrew $100 for her own use.
16 Office supplies purchased for $250 on credit.
17 Cash revenue received $365.
18 Paid weekly wages to the upholsterer.
21 Revenue earned for repairs: cash $80, on credit $170.
23 Shipshape Ltd paid the bill for services rendered on 6th Jan 2018.
24 Petrol expenses paid $20.
25 Paid weekly wages to the upholsterer.
28 Revenue earned for repair work $390, receiving $100 in cash and the remainder to be paid at a later date.
- Office supplies used $200.
Required
Complete a worksheet for the month of January using the above data and prepare an income statement, cash flow statement and balance sheet at 31st January.
(Adapted from a problem in Bazely, M., P. Hancock, A. Berry and R. Jarvis, 1998, Contemporary Accounting – a conceptual approach, (3rd edition), Nelson, Melbourne.)
| Worksheet of Recover Upholstery Repairs | ||||||||||||
| Assets | = | Liabilities | + | Equity | ||||||||
| Cash at | Office | Accounts | Office | Vehicle | Sewing | Accounts | Capital | Profit & | ||||
| bank | Supplies | Receivable | Equipment | Machine | Payable | Loss | ||||||
| 1 | ||||||||||||
| 4 | ||||||||||||
| 6 | ||||||||||||
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| 28 | ||||||||||||
| 31 | ||||||||||||
| TOTALS |
| Recover Upholstery Repairs | |
| Income Statement | |
| For the month ended 31st January 2018 | |
| $ | |
| Fee revenue | |
| Less Other Expenses | |
| Petrol | |
| Office supplies | |
| Electricity | |
| Rent | |
| Postage | |
| Wages | |
| Net Profit | |
| Recover Upholstery Repairs | |
| Balance Sheet | |
| as at 31st January 2018 | |
| $ | |
| Current assets | |
| Cash at bank | |
| Office supplies | |
| Accounts receivable | |
| Total Current Assets | |
| Non current assets | |
| Office equipment | |
| Vehicle | |
| Sewing machine | |
| Total Non Current Assets | |
| Total Assets | |
| Current liabilities | |
| Accounts payable | |
| Total Current Liabilities | |
| Non-current liabilities | |
| Total Non Current Liabilities | |
| Total Liabilities | |
| Net Assets | |
| Owner’s equity | |
| Capital | |
| Add Net Profit | |
| Total Owner’s Equity |
| Recover Upholstery Repairs | |
| Cashflow Statement | |
| for the month ended 31st January 2018 | |
| $ | |
| Cash flows from operating activities | |
| Cash receipts from customers | |
| Cash paid to suppliers and employees | |
| Net cash from operating activities | |
| Cash flows from investing activities | |
| Part payment for sewing machine | |
| Net cash from investing activities | |
| Cash flows from financing activities | |
| Capital contributed by owner | |
| Drawings by owner | |
| Net cash from financing activities | |
| Net change in cash | |
| Cash at the beginning of the month | |
| Cash at the end of the month |
Seminar Activity 3.2: Group Discussion
- For each of the 16 events described in the following table, select one of the following four letters to indicate whether they would be:
F recorded in a cash flow statement as financing activity
O recorded in a cash flow statement as operating activity
I recorded in a cash flow statement as investing activity
N not recorded in a cash flow statement at all
| 1. Received money from debtors |
| 2. Paid an insurance premium |
| 3. Paid a dividend that had been declared in the previous year |
| 4. Purchased inventory for cash |
| 5. Sold furniture and equipment for cash |
| 6. Paid wages for the current year |
| 7. Paid wages related to the previous year |
| 8. Sold shares in the company for cash to raise capital |
| 9. Repaid part of a loan |
| 10. Paid interest on a loan |
| 11. Paid for shares in another company (to be held for more than 1 year) |
| 12. Paid tax on the previous year’s profits |
| 13. Wrote off bad debts |
| 14. Purchased land and buildings for cash |
| 15. Received payment from customers for goods to be provided next year |
| 16. Recorded depreciation on non-current assets |
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