- 20 Marks
Question
a) Mensah & Co. Ltd
Statement of Financial Position as at 31 December 2017
Required:
a) Prepare a statement of cash flow as at 31 December 2017 for Mensah & Co. Ltd using the indirect method. (17 marks)
b) Differentiate between the Direct and Indirect Method of reporting cash flow from operating activities. (3 marks)
Answer
a) Mensah and Co Limited
Statement of Cash Flow for the year ended 31 December 2017
b) Differences between Direct and Indirect Methods of reporting cash flow from operating activities:
- Direct Method: Discloses major classes of gross cash receipts and gross cash payments. It also discloses information not available elsewhere in the financial statements.
- Indirect Method: Presents net profit or loss adjusted for the effect of non-cash transactions, deferrals, and items of income or expense associated with investing or financing activities. It is also simpler to use and is widely used. (2 points for 3 marks)
- Topic: IAS 7: Statement of cash flows
- Series: NOV 2018
- Uploader: Theophilus