I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

PART F: PREPARING BASIC FINANCIAL STATEMENTS 

 

398

 

 

 

Statements of cash flows are a useful addition to the financial statements of companies because it is 

recognised that accounting profit is not the only indicator of a company's performance. They concentrate 

on the sources and uses of cash and are a useful indicator of a company's liquidity and solvency. 

 

You need to be aware of the format of the statement as laid out in IAS 7. Setting out the format is the 

first step. Then follow the step by step preparation procedure. 

 

1 

Fill in the blanks.  

 

The objective of IAS 7 is to provide information for users about the company's ability to generate 

…………. and ……..……………….  

2 

What are the benefits of cash flow information according to IAS 7?  

3 

Define cash and cash equivalents according to IAS 7 in no more than 40 words.  

4 

Which of the following headings is not a classification of cash flows in IAS 7? 

A Operating 

B Investing 

C Administration 

D Financing 

5 

A company has the following information about property, plant and equipment. 

 

 

20X7 

 

20X6 

 

 

$'000 

 

$'000 

Cost 

 

750 

 

600 

Accumulated depreciation 

 

250 

 

150 

Carrying amount 

 

500 

 

450 

Plant with a carrying amount of $75,000 (original cost $90,000) was sold for $30,000 during the year. 

What is the cash flow from investing activities for the year? 

A $95,000 

inflow 

B $210,000 

inflow 

C $210,000 

outflow 

D $95,000 

outflow 

6 

A company has the following extract from a statement of financial position. 

 

20X7 20X6 

 

 

$'000 

 

$'000 

Share capital 

2,000 

1,000 

Share premium 

500 

– 

Loan stock 

750 

1,000 

If there had been a bonus issue of 500,000 shares of $1 each during the year, what is the cash flow 

from financing activities for the year? 

A $1,250 

inflow 

B $750 

inflow 

C $750 

outflow 

D $1,250 

outflow 

7 

When adjusting profit before tax to arrive at cash generated from operations, a decrease in receivables is 

added to profit before tax. Is this statement true or false?