Question

Statement of cash flows

Natasha Bush operates Natasha’s Cafe as a sole trader. Although she is not legally required to, she wants to prepare a statement of cash flows for her business from the following ledger account balances as at 31 March 2019 and 31 March 2018:

	$	$
	2019	2018
Cash at bank	21,125	24,100
Accounts receivable	7,700	8,000
Inventory	21,300	18,000
Prepaid expenses	600	1,100
Term deposit	10,000	20,000
Shop equipment	27,000	25,000
Accumulated depreciation – Equipment	16,500	14,600
Delivery van	40,000	30,000
Accumulated depreciation – Van	4,000	10,000
Accounts payable (for purchases)	8,400	6,000
Accrued wages	1,800	1,400
Accrued expenses	2,800	2,000
Loan – ASB	45,000	10,000
Owner's equity	82,200	82,200
Drawings	62,850
Sales income	225,000
Loss on the sale of delivery van	200
Loss on the sale of shop equipment	300
Interest received	600
Cost of goods sold	79,400
Other expenses	37,225
Wages and salaries expense	76,200
Interest expense	2,400

Additional information

• During the year shop equipment that had cost $5,000 and accumulated depreciation of $3,200 was sold for $1,500. New equipment was purchased.
• During the current financial period, Natasha sold the cafe’s delivery van for $19,800. A new, more economical, hybrid van was purchased for $40,000.
• Other expenses includes depreciation expense.
• You are not required to account for taxes.

Tasks

1. Give two reasons why you think Natasha wants to prepare a statement of cash flows.
2. Using the information provided, prepare a statement of cash flows for the year ended 31 March 2019.
3. Discuss whether or not you think Natasha would be happy with what the cash flow statement shows her about her business.

Answer 1