Page 178 - DMGT403_ACCOUNTING_FOR_MANAGERS

Unit 8: Cash Flow Statement

During the repayment of bonds or redemption of bonds, the cash resources are going out of the Notes
firm.

Bond A/c Dr 12,000
To Cash (redemption) 12,000
Dr. Bond account Cr.

To cash (redemption) 12,000 By Balance B/d (Opening) 24,000
To Balance c/d (Closing) 12,000
24,000 24,000

The next step is to prepare the Adjusted Profit & Loss account
Dr. Adjusted Profit & Loss account Cr.

To Provision for doubtful debts 200 By Balance B/d 20,080
To Goodwill written off 10,000 By Cash from operations 18,240
To Dividends paid 7000
To Balance c/d 21,120
38,320 38,320

The next most important step is to compare the current assets during the two years.
Increase in Accounts payable - 2,960 - Cash inflow
Decrease in Inventories - 13,000 - Cash inflow

Increase in accounts receivable - 5,600 - Cash outflow
The next step is to draft the Cash flow statement.
Cash flow statement

Inflow Outflow
Opening cash balance 18,000 Increase in bills receivable 5,600
Issue of shares 8,000 Purchases of land 20,000
Increase in Bills payable 2,960 Dividends paid 7,000
Decrease in stock 13,000 Bonds repaid 12,000
Cash from operations 18,240 Closing cash balance 15,600

60,200 60,200

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