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The following are the balance sheets of Puspure plc as at 31/12/2021 and 31/12/2020 together with an abridged profit and loss account for the year ended 31/12/2021 - Leaving Cert Accounting - Question 2 - 2022
Question 2
The following are the balance sheets of Puspure plc as at 31/12/2021 and 31/12/2020 together with an abridged profit and loss account for the year ended 31/12/2021. ... show full transcript
Worked Solution & Example Answer:The following are the balance sheets of Puspure plc as at 31/12/2021 and 31/12/2020 together with an abridged profit and loss account for the year ended 31/12/2021 - Leaving Cert Accounting - Question 2 - 2022
Step 1
Prepare the cash flow statement of Puspure plc for the year ended 31/12/2021 including reconciliation statements.
Answer
Cash Flow Statement of Puspure plc for the year ended 31/12/2021
Operating Activities
- Net Cash Inflow from Operating Activities: €231,000
Return on Investment and Servicing of Finance
- Investment Income Received: €3,700
- Debenture Interest Paid: (€11,400)
Taxation
- Tax Paid: (€62,000)
Capital Expenditure and Financial Investments
- Payments to Acquire Buildings: (€118,000)
- Receipts for Sale of Machinery: €20,000
- Proceeds from Sale of Machinery: €33,000
Equity Dividends Paid
- Equity Dividends Paid: (€30,800)
Net Cash Flow before Liquid Resources and Financing
- Net Cash Flow: €65,500
Management of Liquid Resources
- Purchase of Government Securities: (€25,000)
Financing
- Repayment of Debentures: (€100,000)
- Receipts from Issue of Ordinary Shares: €80,000
- Receipts from Share Premium: €12,000
Increase in Cash
- Increase in Cash: €22,500
Reconciliation of Net Cash to Movement in Net Debt
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Increase in Cash: €22,500
-
Cash used to Purchase Liquid Resources: (€25,000)
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Repayment of Debentures: (€100,000)
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Change in Net Debt: €147,500
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Net Debt 01/01/2021
- Debentures: (€200,000)
- Bank: €8,500
- Government Securities: €10,000
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Net Debt 31/12/2021
- Debentures: (€100,000)
- Bank: €14,000
- Government Securities: (€51,000)
Step 2
What is a Financial Reporting Standard?
Answer
A Financial Reporting Standard is a rule that must be applied to all financial statements in order to give a true and fair view of the company’s financial position. It is designed to provide guidelines that allow accounts to be compared from year to year and between different companies.
Step 3
Distinguish between a cash gain and a non-cash gain for Puspure plc. Give one example of each from the financial statements of Puspure plc.
Answer
Cash Gain
A cash gain refers to an increase in cash resources, such as income earned in cash. For instance, the investment income received amounting to €3,700 is a cash gain.
Non-Cash Gain
A non-cash gain refers to a profit that does not result in an inflow of cash. The profit on the sale of fixed assets, such as the disposed machinery for €33,000 recognized in the profit or loss account, is an example of a non-cash gain.