Financial Accounting: Income Statement, Balance Sheet, and Cash Flow Statement

This article covers financial accounting and provides solved assignments for preparing income statement, balance sheet, and cash flow statement. It also explains what will be added back or deducted from the cash flow statement. The subject is Financial Accounting and the course code is not mentioned. The content is relevant for college and university students studying accounting and finance.

Financial Accounting

Table of Contents
TASK 1............................................................................................................................................3
Prepare Income Statement...........................................................................................................3
Balance Sheet..............................................................................................................................4
TASK 2............................................................................................................................................4
Prepare Cash Flow Statement.....................................................................................................4
What will be added back or deducted from the cash flow statement..........................................5
REFERENCES................................................................................................................................6

TASK 1
Prepare Income Statement.
Particulars Amount (£)
Sales 164000
Less: Cost of Goods Sold 101600
Purchases 100000
Closing Inventory -4400
Opening stock 6000
Add: Drawings 500
Gross Profit 62900
Less: Operating Expenses 56590
Discount Allowed 920
Rent and Rates 8000
Carriage Outwards 1500
Heating & Lighting 4500
Salaries & Wages 37000
Motor Running Cost 720
Depreciation on Delivery Van 2250
Depreciation on Shop Fittings 1700
Operating Income 6310
Add: Discount received 500
Net profit 6810
Working Notes:

Motor Running Cost = Cost + Outstanding Expenses
= 630 + 90 = 720
Rent and rate = Cost – Prepaid Expenses
= 9300 – 1300 = 8000
Depreciation:
 Delivery van = 9000 * 25% = 2250
 Shop Fittings = 8500 * 20% = 1700
Balance Sheet
Liabilities Amount (£) Assets Amount (£)
Capital 30000 Delivery Van 9000
Add: Net profit 6810 Less: Accumulated
Depreciation
-3500
Less: Drawings -14000 Less: Depreciation -2250 3250
Less: Personal use -500 22310 Shop fitting 8500
Trade Payables 5000 Less: Accumulated
Depreciation
-1500
Bank overdraft 1200 Less: Depreciation -1700 5300
Outstanding expenses 90 Closing stock 4400
Prepaid expenses 1300
Trade receivables 13000
Cash in hand 1350
Total Liabilities and
Equity
28600 Total Assets 28600

TASK 2
Prepare Cash Flow Statement.
Non – current assets = £125,000
Cash from Operating Activities = £11,000
Dividends Paid = £18,000
Opening Balance of Cash = £15,000
Borrowings = £90,000
Cash Flow Statement
Particulars Amount (£)
Operating Activities
Net Cash flow from operating activities 11000
Investing Activities
Non – current assets -125000
Net cash flow from Investing activities -125000
Financing activities
Dividends Paid -18000
Borrowings 90000
Net Cash flow from Financing Activities 72000
Net Cash flow -42000
Opening balance of cash and cash equivalents 15000
Closing Balance -27000
What will be added back or deducted from the cash flow statement.
a) Depreciation: It will be added back to the cash flow statement in the operating
activities. It has an indirect impact because it will change the tax liabilities of the Elena Ltd..

b) Disposal of Current Assets: It will also be added back to the net profit of Elena Ltd.. When
using the indirect method of the cash flow statement . It will come in the cash flow from the
operating activities.
c) Increase in inventories: It directly affects the cash flow statement of the company. It will be
deducted in the head of the current assets in operating activities of the Elena Ltd..

REFERENCES
Books and Journals
Ekman, B., Mishra, S., Pupulin, A., Khasnabis, C., Allen, M. and Huber, M., 2021. Sustainable
and equitable provision of wheelchairs in low-and middle-income countries: an
economic assessment of the models for wheelchair provision in Tajikistan. Disability
and Rehabilitation: Assistive Technology. 16(8). pp.865-870.
Tran, Q.T., 2020. Corporate cash holdings and financial crisis: new evidence from an emerging
market. Eurasian Business Review. 10(2). pp.271-285.