Required: Prepare a statement of cash flows for the business for 2018. 6.5 The following are the financial statements for Nailsea plc for the years ended 30 June 2017 and 2018: Income statement for years ended 30 June 2017 2018 £m £m 2,280 1,230 (722) (1,618) (320) Revenue Operating expenses Depreciation Operating profit Interest payable (270) 238 342 (27) Profit before taxation 238 315 Тахation (110) (140) Profit for the year 128 175 Statements of financial position as at 30 June 2017 2018 £m £m ASSETS Non-current assets Property, plant and equipment (at carrying amount) Land and buildings Plant and machinery 1,500 1,900 810 740 2,640 2,310 Current assets Inventories 275 450 Trade receivables 100 250 Bank 118 Total assets EQUITY AND LIABILITIES 375 2,685 818 3,458 Equity Share capital (fully paid £1 shares) Share premium account Retained earnings 1,400 1,600 300 200 828 958 2,428 Non-current llabilities Borrowings -9% loan notes (repayable 2022) Current liabilities 2,858 300 Borrowings (all bank overdraft) Trade payables Taxation 32 170 230 55 257 2,685 70 Total equity and liabilities 300 232 CHAPTER 6 MEASURING AND REPORTING CASH FLOWS 3,458 There were no disposals of non-current assets in either year. Dividends were paid in 2017 and 2018 of £40 million and £45 million, respectively. Required: Prepare a statement of cash flows for Nailsea plc for the year ended 30 June 2018.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
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