The accountant of M. Albright, a sole trader in cotton materials, presents her annual balance sheets of the last two years as shown below. (All amounts in €) 2019 2020 Non-current assets 31,000 (3,000) 28,000 37,000 (3,400) 33,600 Accumulated depreciation Current assets Inventory Trade accounts receivable 6,200 7,800 3,000 11,800 6,800 Bank 17,000 45,000 18,600 52,200 Total assets Current liabilities Trade accounts payable Bank overdraft 4,000 4,400 1,800 Total liabilities (4,000) 41,000 (6,200) 46,000 Net assets Capital account 40,000 14,000 41,000 17,000 4,000 (16,000) 46,000 Balance at 1/1 Net profit for the year Additional capital introduced Drawings (13,000) 41,000 Total capital The accountant is faced with the task of explaining Mrs. Albright why she has an overdraft, despite the fact that she made more profit than the year before and has brought in capital during the year. (a) Required: Draw up a cash flow statement to help the accountant in explaining to Mrs. Albright how his overdraft has come about. (b) Based on the concepts learned in this course, explain how this company can apply the cash flow for cash management (c) With relevant principles learned in this course explain whether profit for the year is equivalent to cash and provide reasons for your answer
The accountant of M. Albright, a sole trader in cotton materials, presents her annual balance sheets of the last two years as shown below. (All amounts in €) 2019 2020 Non-current assets 31,000 (3,000) 28,000 37,000 (3,400) 33,600 Accumulated depreciation Current assets Inventory Trade accounts receivable 6,200 7,800 3,000 11,800 6,800 Bank 17,000 45,000 18,600 52,200 Total assets Current liabilities Trade accounts payable Bank overdraft 4,000 4,400 1,800 Total liabilities (4,000) 41,000 (6,200) 46,000 Net assets Capital account 40,000 14,000 41,000 17,000 4,000 (16,000) 46,000 Balance at 1/1 Net profit for the year Additional capital introduced Drawings (13,000) 41,000 Total capital The accountant is faced with the task of explaining Mrs. Albright why she has an overdraft, despite the fact that she made more profit than the year before and has brought in capital during the year. (a) Required: Draw up a cash flow statement to help the accountant in explaining to Mrs. Albright how his overdraft has come about. (b) Based on the concepts learned in this course, explain how this company can apply the cash flow for cash management (c) With relevant principles learned in this course explain whether profit for the year is equivalent to cash and provide reasons for your answer
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:The accountant of M. Albright, a sole trader in cotton materials, presents her annual
balance sheets of the last two years as shown below.
|(All amounts in €)
2019
2020
37,000
(3,400)
33,600
Non-current assets
31,000
(3,000)
28,000
Accumulated depreciation
Current assets
Inventory
Trade accounts receivable
6,200
7,800
3,000
11,800
6,800
Bank
17,000
45,000
18,600
52,200
Total assets
Current liabilities
Trade accounts payable
Bank overdraft
4,000
4,400
1,800
(4,000)
41,000
(6,200)
46,000
Total liabilities
Net assets
Capital account
Balance at 1/1
40,000
14,000
Net profit for the year
Additional capital introduced
Drawings
41,000
17,000
4,000
(16,000)
46,000
Total capital
(13,000)
41,000
The accountant is faced with the task of explaining Mrs. Albright why she has an
overdraft, despite the fact that she made more profit than the year before and has
brought in capital during the year.
(a) Required:
Draw up a cash flow statement to help the accountant in explaining to Mrs. Albright
how his overdraft has come about.
(b) Based on the concepts learned in this course, explain how this company can apply
the cash flow for cash management
(c) With relevant principles learned in this course explain whether profit for the year is
equivalent to cash and provide reasons for your answer
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