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 6^th 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 31^st January.

(Adapted from a problem in Bazely, M., P. Hancock, A. Berry and R. Jarvis, 1998,  Contemporary Accounting – a conceptual approach,  (3^rd 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
7
8
12
13
14
15
16
17
18
21
23
24
25
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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