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STAGE 2 ACCOUNTING
ASSESSMENT TYPE 1: SKILLS AND APPLICATIONS TASK
STATEMENT OF CASH FLOWS
Angela owns and operates a book store called Reading Stacks. She has provided you
with the following information for use in the preparation of the statement of cash flows for
the year ended 30 June 2008.
READING STACKS
Income Statement for Year Ended 30 June 2008
Revenue
Credit Sales
Cash Sales
310 000
70 600
Cost of Goods Sold
Opening inventory
Credit Purchases
Freight
Closing inventory
35 000
172 900
7 200
31 000
Gross Profit
196 500
Other Revenue
Rent
Discount
8 000
2 000
Expenses
Wages
Discount
Administration
Advertising
Doubtful Debts
Depreciation on equipment
Net Profit
Page 1 of 6
78 700
2 400
37 300
9 000
11 000
1 200
66 900
Stage 2 Accounting annotated student work
Ob Ref: A150522 (January 2012)
© SACE Board of South Australia 2012
READING STACKS
Comparative Balance Sheets as at 30 June 2008 and 30 June 2007
2008
2007
322 100
0
27 100
66 900
361 900
271 400
11 600
13 000
52 100
322 100
Assets
Current
Bank
Debtors
Allowance for doubtful debts
Prepaid advertising
Inventory
0
71 100
(11 000)
900
31 000
4 350
52 000
0
250
35 000
Non-current
Furniture
Investments
Land and buildings
Equipment
Accumulated depreciation on equipment
14 800
15 000
400 000
14 000
(5 000)
19 800
15 000
325 000
14 000
(3 800)
Liabilities
Current
Creditors
Accrued wages
21 400
2 500
16 500
2 000
Bank overdraft
1 000
0
Non-current
Mortgage
144 000
121 000
NET ASSETS
361 900
322 100
Owner’s Equity
Capital
Additional Capital
Drawings
Net Profit
Other Information
 All acquisitions and disposals of non-current assets were for cash.
 All drawings were cash drawings.
Page 2 of 6
Stage 2 Accounting annotated student work
Ob Ref: A150522 (January 2012)
© SACE Board of South Australia 2012
1
Use this page to prepare relevant calculations necessary in the preparation of the cash flow
statement.
a)
Calculate Receipts from Customers
Opening balance
+ sales
-discount
-closing balance
52000
310000
2400
71100
****bank
288500
(3 Marks)
b)
Calculate Payments to Suppliers
Opening creditors
+ purchases
-discount
-closing balance
16500
172900
2000
21400
****bank
166000
(3 Marks)
c)
Calculate Payments for Advertising
Expense
+ prepaid ‘08
9000
900
- prepaid ‘07
9900
250
8350
(2 Marks)
d)
Calculate Payments for Wages
Expense
- owing ‘07
+ owing ‘08
78700
2000
2500
79200
(2 Marks)
Page 3 of 6
Stage 2 Accounting annotated student work
Ob Ref: A150522 (January 2012)
© SACE Board of South Australia 2012
Application
Appropriate
application of
the process
required to
maintain
financial
information in
order to report
the results of
business
activity.
2
Prepare the Statement of Cash Flows for Reading Stacks for the year ended 30 June 2008
(10 Marks)
READING STACKS
Statement of Cash Flows for Year Ended 30 June 2008
CASH FLOWS FROM OPERATING ACTIVITIES
Inflows
Receipts from Customers
Cash Sales
Rent Revenue
Outflows
Payment to Suppliers
Other operating activities: Advertising
Wages
Admin
Freight
Net cash flows from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Inflows
Outflows
Land and Building
$
$
288 500
70 600
8 000
367 100
166 000
9 900
79 200
37 300
7 200
299 600
$
67 500
Competent
understanding of
the process
required to
maintain financial
information in
order to report the
results of business
activity.
75 000
( 75 000)
Net cash flows from investing activities
Application
Appropriate
application of the
process required
to maintain
financial
information in
order to report the
results of business
activity.
CASH FLOWS FROM FINANCING ACTIVITIES
Inflows
Capital
50 700
50 700
Outflows
Drawings
Mortgage
Bank Overdraft
25 800
23 000
1 000
(29 100)
Net cash flows from financing activities
21 600
NET INCREASE/DECREASE IN CASH HELD
14 100
CASH AT BEGINNING OF PERIOD
4 350
CASH AT END OF PERIOD
18 450
Page 4 of 6
Understanding
Informed
recognition,
understanding and
recording and
reporting of
financial
information in a
manner
appropriate to the
identified needs of
the user.
Stage 2 Accounting annotated student work
Ob Ref: A150522 (January 2012)
© SACE Board of South Australia 2012
3
With reference to your calculations in the Statement of Cash Flows explain the significance of the
net cash flows from :
(i) Operating activities
It is important to have a positive cash flow from operating cash flows as this is predominantly
where revenue comes from
(ii) Investing activities
Analysis and
Interpretation
Considered
analysis of
financial and nonfinancial
information for
decision-making
and problemsolving.
It is important for the business to have investment in non-current assets for future operation
(iii) Financing activities
Financing shows the Capital, that is, what the business owes the owner.
(6 Marks)
4
Explain the importance of having a positive net cash inflow from operating activities.
Operating expenses are usually the ‘main’ activity of a business and it is important that the cash
flow is positive to support other operations if needed
(2 Marks)
5
Using examples, explain how it is possible for the Statement of Cash flows for Reading Stacks to
have this Negative Balance at the end of the period, when they recorded a Net Profit in the
Income Statement.
The Income Statement includes Stock and other items that are not shown in the Statement of
Cash Flows, that is why they will always have different answers. For example “Closing Stock” is
valued at cost price or what it can be sold for, whichever is the lowest. This is $31 000 and
therefore would make a difference to the Cash at end of the period in the Statement of Cash
Flows.
(4 Marks)
Additional comments
A review of the response provides evidence of:
Communication

informed communication of some financial information in a mostly clear manner appropriate to
the identified needs of the user.

Page 5 of 6
generally appropriate and informed use of accounting terminology.
Stage 2 Accounting annotated student work
Ob Ref: A150522 (January 2012)
© SACE Board of South Australia 2012
Analysis and
Interpretation
Considered
interpretation of
financial and nonfinancial
information.
Performance Standards for Stage 2 Accounting
A
Understanding
Analysis and
Interpretation
Application
Communication
Astute identification of various accounting entities and the main users of
financial information.
Astute analysis of
financial and nonfinancial
information for
decision-making
and problemsolving.
Comprehensive, logical,
and astute application of
identified accounting
concepts to generate
financial reports.
Astute communication
of financial
information in a
coherent manner
most appropriate to
the identified needs of
the user.
Comprehensive recognition, understanding, recording, and reporting of
financial information in a manner appropriate to the identified needs of
the user.
Insightful recognition that accounting concepts and standards determine
the responsibilities and obligations of accounting entities to report
financial information.
Comprehensive and well-informed understanding of the process required
to maintain financial information in order to report the results of business
activity.
Perceptive and
critical
interpretation of
financial and nonfinancial
information.
Perceptive application of
the process required to
maintain financial
information in order to
report the results of
business activity.
Highly appropriate
and well-informed use
of a range of
accounting
terminology.
Insightful and well-informed recognition of how social, legal, regulatory
and ethical issues both influence and are influenced by business and
accounting decisions.
B
Well-considered identification of various accounting entities and the main
users of financial information.
Detailed recognition, understanding, recording, and reporting of financial
information in a manner appropriate to the identified needs of the user.
Clear recognition that accounting concepts and standards determine the
responsibilities and obligations of accounting entities to report financial
information.
Detailed understanding of the process required to maintain financial
information in order to report the results of business activity.
Well-informed recognition of how social, legal, regulatory and ethical
issues both influence and are influenced by business and accounting
decisions.
C
Considered identification of a range of accounting entities and main
users of financial information.
Informed recognition, understanding, recording, and reporting of financial
information in a manner appropriate to the identified needs of the user.
Informed recognition that accounting concepts and standards determine
the responsibilities and obligations of accounting entities to report
financial information.
Competent understanding of the process required to maintain financial
information in order to report the results of business activity.
Informed recognition of how social, legal, regulatory and ethical issues
both influence and are influenced by business and accounting decisions.
D
Identification of some accounting entities and/or the main users of
financial information.
Recognition, recording, and reporting of some basic financial information.
Some recognition that accounting concepts and standards determine the
responsibilities and obligations of accounting entities to report financial
information.
Some understanding of the process required to maintain financial
information in order to report the results of business activity, with
evidence of some inconsistencies.
Some recognition that social, legal, regulatory and/or ethical issues both
influence and are influenced by business and accounting decisions.
E
Limited identification of accounting entities or main users of financial
information.
Limited recognition, recording, or reporting of basic financial information.
Emerging awareness of the role of accounting concepts and standards.
Emerging awareness of the process required to maintain financial
information in order to report the results of business activity.
Emerging awareness of how social, legal, regulatory and/or ethical
issues influence business and accounting decisions.
Page 6 of 6
Thoughtful analysis
of financial and
non-financial
information for
decision-making
and problemsolving.
Well-considered
and critical
interpretation of
financial and nonfinancial
information.
Considered
analysis of financial
and non-financial
information for
decision-making
and problemsolving.
Considered
interpretation of
financial and nonfinancial
information.
Some recognition
and basic use of
financial and nonfinancial
information for
decision-making
and problemsolving.
Some endeavour to
interpret financial
and non-financial
information.
Limited recognition
or use of financial
and non-financial
information for
decision-making
and problemsolving.
Description of
some financial or
non-financial
information.
Capable and wellinformed application of
identified accounting
concepts to generate
financial reports.
Thoughtful application of
the process required to
maintain financial
information in order to
report the results of
business activity.
Competent application
of identified accounting
concepts to generate
financial reports.
Appropriate application
of the process required
to maintain financial
information in order to
report the results of
business activity.
Basic application of
some identified
accounting concepts to
generate one or more
financial reports.
Partial application of the
process required to
maintain financial
information in order to
report the results of
business activity.
Attempted application of
one or more identified
accounting concepts to
generate a financial
report.
Recognition of one or
more aspects of the
process required to
maintain financial
information in order to
report the results of
business activity.
Stage 2 Accounting annotated student work
Ob Ref: A150522 (January 2012)
© SACE Board of South Australia 2012
Well-informed
communication of
financial information
in a clear manner
appropriate to the
identified needs of the
user.
Appropriate and wellinformed use of
accounting
terminology.
Informed
communication of
some financial
information in a
mostly clear manner
appropriate to the
identified needs of the
user.
Generally appropriate
and informed use of
accounting
terminology.
Some clarity of
communication about
some aspects of
financial information.
Inconsistent use of
some accounting
terminology.
Limited
communication of one
or more aspects of
financial information.
Attempted use of a
limited range of
accounting
terminology.