ABC Limited Step 1
Statement of Cash Flows
For the year ended 31 December 2016
$’000
Cash flows from operating activities Step 2
Profit before tax 1,285 Step 3
Adjustment for:
(I. Non-cash items: depreciation expense, amortization
expense, impairment loss, provision, bad debt expense…
(II. Gain or loss on disposal of non-current assets
(III. Adjust for the interest expense and interest income,
dividend income)
Depreciation Expense 98 Step 4
Amortisation Expense 150 Step 5
Gain or loss on disposal (10) Step 6
Interest expense (30 from debenture and 30 from lease)appear 60 Step 7
again in operating
Dividend income , appear again in investing (20) Step 8
Operating profit before working capital changes 1,563 Step 9
(1,285 + 98 +150 -10 +60 -20)
(Consider the working capital changes Step 10
- Focus on the change in the current assets accounts EXCEPT
investment relate current assets / Cash and Cash equivalent
- Focus on the change in the current liabilities accounts
EXCEPT financing related current liabilities / Cash equivalent
- Exclude tax related accounts and interest related accounts
Increase Decrease
Current assets - +
Current liabilities + -
-
Increase in inventories (1,600 – 1,440) (160) Step 10
Increase in trade debtors (1,620 – 1,252) (368) Step 10
Decrease in trade creditor (708 – 664) (44) Step 10
Cash generated from operation (1,563 -160 – 368 – 44) 991 Step 11
Interest paid (60) Step 12
(Analyse the interest payable account
= Beginning balance of interest payable + Interest expense from
profit or loss – Cash payment of interest = Ending balance of
interest payable)
Beginning balance of interest payable (0) + Interest expense from
profit or loss (30 + 30 = 60) – Cash payment of interest (60) =
Ending balance of interest payable (0)
Tax paid (358) Step 13
(Analyse the tax payable account = Beginning balance of tax
payable + tax expense from profit or loss – Cash payment of tax
= Ending balance of tax payable)
Beginning balance of tax payable (current tax and deferred tax:
323 + 210) + tax expense from profit or loss (350) – Cash payment
of tax (XXX) = Ending balance of tax payable (225 + 300)
Cash flows from operating activities (991 – 60 – 358) 573 Step 14
Cash Flows From Investing Activities Step 15
(Focus on
I. Amount of cash used <purchase> or Amount of cash received
<sale>
II. Focus on non-currents assets account and investment
related current assets and Interest income received and dividend
income
(Analyse the non-current asset (net) account = Beginning balance
of non-current assets + addition + revaluation increase – carrying
amount of asset deposed – revaluation decrease – depreciation /
amortisation = Ending balance of non-current assets)
(No addition by cash or no disposal with cash) Step 16
Cash used to purchase plant and machinery (170) Step 17
Cash received from sale of plant and machinery 147 Step 17
Cash used to purchase investments (60) Step 18
Beginning balance of investment (440) + addition (60) +
revaluation increase (0) – carrying amount of investment deposed
(0) – revaluation decrease (0) = Ending balance of investment
(500)
Dividend income received 20 Step 19
(Analyse the dividend receivable account = 0Beginning balance of
dividend receivable + dividend income from profit or loss – cash
received from dividend 20= Ending balance of dividend
receivable0)
Cash flows from investing activities (-170+147-60+20) (63) Step 20
Cash Flows from Financing Activities Step 21
(Focus on
I. Amount of cash used or Amount of cash received
II. Focus on non-current liabilities account and financing related
current liabilities and Equity accounts and Dividend paid)
Cash received from issue of debentures (290 -200) 90 Step 22
Capital payment of lease (120) Step 23
Beginning balance of lease liability (current + non-current = 0 + 0)
+ Addition (500) + Interest on lease (30) – Capital repayment (120)
– Cash payment for interest (30) = Ending balance of lease liability
(160 + 220)
Cash received from issue of shares (3,498 – 3,000) 498 Step 24
Dividend paid (408) Step 25
Analyse the retained earnings to find the amount of dividend to
be paid:
Beginning retained earnings (1,199) + Profit for the year (935) –
Dividend declared (420) = Ending balance of retained earnings
(1,714)
Find the dividend paid in cash by looking at dividend payable
account
Beginning balance of dividend payable (198) + Dividend declared
(420) – Dividend paid (408) = Ending balance of dividend payable
(210)
Cash flows from financing activities (90-120+498-408) 60 Step 26
Net changes in cash and cash equivalent during year (573 – 63 570 Step 27
+60)
Add: Cash and cash equivalent at the beginning of the year 44 Step 28
Cash and cash equivalent at the end of the year 614 Step 28
Working 1
Find the depreciation expense from analysing the movements of plant and machinery cost
and accumulated depreciation accounts
PPE cost account: Beginning balance + items that increase the account (Addition of PPE /
PPE revaluation upward) – items that decrease the account (Disposal / PPE revaluation
downward )= Ending balance of the account
PPE accumulated depreciation account = Beginning balance + items that increase the
account (depreciation expense) – items that decrease the account (accumulated
depreciation of the disposed PPE )= Ending balance of the account
PPE – Cost $ PPE – Accumulated depreciation $
account
Beginning balance 1,990 Beginning balance 678
Add: Addition of PPE by lease 500 Addition: Depreciation for the 98* diff
(Not included in investing year (Step 4)
activities as it does not involve
cash)
Add: other addition of PPE (Step 170 Less: Acc. Dep of disposed PPE (83)
17)
Less: Disposal of PPE (220) Ending balance 693
Ending balance 2,440
Working 2
Find the amortization expense by analysing the intangible asset (net) account
IA (net) account: Beginning balance + items that increase the account (Addition of IA / IA
revaluation upward) – items that decrease the account (Disposal of IA net / IA revaluation
downward / amortisation)= Ending balance of the account
IA – net $
Beginning balance 1,350
Less: Amortisation (Step 5) (150)
Ending balance 1,200
Working 3
Find the cash proceeds from sale of plant and machinery
Sales proceeds = carrying amount of asset disposed + Gain on disposal – Loss on disposal
Sales proceeds = (220,000 – 83,000) +10,000 = 147,000 Step 17
