F7 - financial reporting

F7-FINANCIAL REPORTING

Question Pattern:

In section A you will have 15 questions i.e, for 2marks so totally 30marks.

In section B you will have 15 questions i.e, for 2marks so totally 30marks.

Total marks 60 and this is for computer validated.

And whereas you will have 2questions where each carries 20marks so totally 40 marks. And this is for human validated.

Now will move on to the first topic in financial reporting.

CASH FLOW STATEMENT:

The cash flow statement is a statement that shows cash and cash equivalents during the period under report. The statements net increase or decrease of cash and cash equivalents under each activity. Separating, operating, investing, and financing as well as collectively.

There are three activities in the cash flow statement:

1. Cash flows from operating activities (Main business activities).

2. Cash flows from investing activities.

• Purchase and sale of plant and machinery.
• Purchase and sale of an investment.
• Purchasing shares and debentures from other companies.
• Loans made to other parties.
• Receipts from sales of shares and debentures.

3. Cash flows from financing activities

• Issue of share capital.
• Bank loan and repayment.
• Cash proceeds from issuing debentures, loan notes, bonds, mortgage, and other short term and long term borrowing.
• Cash repayment of the amount borrowed.
• Cash payment made by a lessee relating to finance.
• Cash payment to owners of the owners then by back.

CASH FLOW STATEMENT (INDIRECT METHOD)

Cash flows from operating activities:

Profit before tax                                   ***

ADD: depreciation                               ***

          Interest expenses                      ***

          Loss on sale of non-

          Current asset                             ***

LESS: profit on sale of non-

          Current assets                            ***

ADD: decrease in inventories            ***

LESS: increase in inventories             ***

ADD: decrease in inventories            ***

LESS: increase in inventories             ***

ADD: decrease in receivable             ***

LESS: increase in receivable              ***

ADD: increase in payable                  ***

LESS: decrease in payable                 ***

Cash generated from operation  ------     

  ADD: interest received

  LESS: interest paid

LESS: income tax paid ------

Net cash flows from 

operations activities 

NOTES:

• Interest paid can be classified as operating cash flows or financing cash flow.
• Interest received and dividend operating cash flow and investing cash flow.
• Dividend paid usually classified as financing cash flow can also be calculated as operating cash flow.
• Cash and cash equivalents 

1. Cash in hand.

2. Cash at the bank.

3. Short term investment with a maturity period.

4. Bank overdraft will be treated as negative cash in hand for opening and closing balance of cash and cash equivalent.