QUESTION SIX (August 2009)

(a)

Explain clearly why a cash flow statement is necessary even though it is the profit
figure for the year that is most important to any company.
(5 marks)

(b)

Catchup plc operates within the food wholesale sector distributing a range of top quality
spices and condiments to restaurants. The following financial statements relate to the
company for the past two years.

Balance sheet as at 31 March

Non-current assets (NBV)
Current assets
Inventory
Receivables
Total Assets
Equity and liabilities
Ordinary shares 5p
Share premium
Accumulated profit
Current liabilities
Trade payables
Dividends
Taxation
Bank overdraft

Income Statement for the year ending 31 March

2009
000
Gross profit
460 020
Less: expenses
316 920
Operating profit
143 100
Profit/(loss) on sale of non-current assets
(4 200)
Net profit before interest and tax
138 900
Less interest paid
30 000
Profit before taxation
108 900
Taxation
42 000
Profit after taxation
66 900
Dividends
60 000

2009
000
162 000

2008
000
141 000

42 000
57 300
99 300
261 300

33 000
52 200
85 200
226 200

63 000
22 500
32 400
117 900

30 000
52 500
25 500
108 000

42 600
48 000
42 000
10 800
143 400
261 300

46 500
25 500
39 000
7 200
118 200
226 200

2008
000
396 600
284 700
111 900
8 400
120 300
30 000
90 300
39 000
51 300
34 500

Retained profit for the year

6 900

16 800

You are provided with the following additional information:

1. A bonus issue of ordinary shares was made during the year to 31 March 2009 by
utilising 30 000 from the share premium account.
2. A summary of the companys non-current assets for the year ended 31 March 2009
was provided:

01.04.08
31.03.09

Balance b/d
Additions

Non-current Assets - cost

000
261 000
31.03.09
42 000
31.03.09
303 000

Disposals
Balance c/d

000
36 000
267 000
303 000

The non-current assets which were sold realised 7 200 000 which represented a loss on
disposal of 4 200 000 when compared to their net book value.
YOU ARE REQUIRED TO:
Produce a cash flow statement for the company for the year ended 31 March 2009 applying
IAS 7 format.
(20 marks)
TOTAL 25 Marks