Acca financial Accounting (FA) Study Text ac ca (FA)

Calculation of proceeds or repayment of a loan 

This cash flow is derived by comparing the brought forward balance with the 

balance carried forward. A fall in the amount outstanding indicates that all or 

part of the loan has been repaid in the year (a cash outflow). An increase 

indicates that there has been a further loan received in the year (a cash inflow). 

Note that this is one of the few cash flows that could be either a cash inflow or a 

cash outflow. 

Dividends paid 

A business entity can only account for dividends paid to its own shareholders on 

a cash basis in the financial statements. As dividends paid are effectively paid 

out of retained earnings, it is usually necessary to reconcile the opening and 

closing balances on retained earnings to identify any dividend paid in the year 

as a balancing figure. 

Note that IAS 7 permits dividends paid to be classified as either an operating 

cash flow or as a financing cash flow. It is more usual to classify dividends paid 

as a financing cash flow.