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Required:
Prepare a cash flow statement for Rellis Limited for the year ended 31 December 2007 in
accordance with IAS 7 using the direct method.
Solution
Notes to the cash flow statement 31/12/2006 Cash outflow
cash & cash equivalents 1,100 -860
Working:
Cash receipts from customers
Opening debtors €2,130
Sales 24,000
Less closing debtors (€2,310+€260 Prov bd) -2,570
Cash received from customers 23,560 (O.A)
Cash paid to suppliers
Opening stock €1,800
Purchases… By deduction 14,100
Less closing stock 2,400
Cost of sales 13,500
Opening creditors €1,020
Purchases … from above 14,100
Less closing creditors -1,260
Cash paid to suppliers 13,860 (O.A)
Disposal of equipment
NBV (€2,400,000-€800,000) €1,600
Profit on disposal 300
Proceeds from disposal €1,900 (I.A)
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If I remember my IFRS/IAS cashflow properly, the O, F and I stand for Operating, Financial and Investment, and the A is Activites.
So: Operating Activities cashflows are basically cash generated from your usual day to day trade, e.g. selling stuff to customers and then buying more stuff, paying off your trading debts/creditors, collecting cash etc.
Financial Activities: Would (I think!!) be things like paying off long term loans or taking on new finance.
Investment Activities would be buying and selling your fixed assets (like plant and machinery, vehicles or investments in other companies), and the associated cashflows.