Chapter - 11 IAS 7: STATEMENT OF CASH FLOWS – Formats (1)

-------------- Cash flow format -----------

[Indirect method]
Company name
Statement of cash flows
For the year ended -----------------
Rs.’000 Rs.’000
Cash flow from operating activities:
Profit before tax (W-1) XXX
Add: Depreciation / Impairment loss (W-3) XXX
Loss on disposal of asset (W-3, W-6, W-12) XXX
Revaluation loss (P&L) XXX
Interest expense/Finance cost (W-4) XXX
Bad debt expense (W-5) [Note-1] XXX
Fair value loss on investment property (W-6) XXX
Less: Interest / investment income (W-7) (XXX)
Dividend income (W-8) (XXX)
Fair value gain on investment property (W-6) (XXX)
Grant income (W-9) (XXX)
Revaluation loss reversal (P&L) (XXX)
Profit on sale of asset (W-3, W-6, W-12) (XXX)
Operating profit before working capital changes: XXX
(Increase) / Decrease in debtors [Note-1] (XXX) / XXX
(Increase) / Decrease in stocks (XXX) / XXX
(Increase) / Decrease in advance to supplier [Note-2] (XXX) / XXX
(Increase) / Decrease in prepayments (XXX) / XXX
Increase / (Decrease) in creditors XXX / (XXX)
Increase / (Decrease) in accrued expenses XXX / (XXX)
Cash generated from operations XXX
Tax paid (W-10) (XXX)
Interest paid (W-4) (XXX)
Dividend received (W-8) XXX
Interest received (W-7) XXX
Cash inflow / (Outflow) from operating activities (A) XXX

Cash flow from investing activities:

Purchase of PPE (W-3) (XXX)
Sale of PPE / Insurance claim received (W-3) XXX
Purchase of investment property (W-6) (XXX)
Sale of investment property (W-6) XXX
Expenditure on capital WIP (W-11) (XXX)
Long term deposits (XXX)
Govt. grant received (W-9) XXX
Govt. grant repaid (W-9) (XXX)
Purchase of investment (W-12) (XXX)
Sale of investment (W-12) XXX
Cash inflow / (outflow) from investing activities (B) XXX

Cash flow from financing activities:

Issue of shares (W-13) XXX
Dividend paid (W-2) (XXX)
Proceeds from loan (W-14) XXX
Repayment / redemption of loan (W-14) (XXX)
Cash inflow / (outflow) from financing activities (C) XXX
Net cash inflow / (outflow) during the year (A + B + C) XXX
Cash and cash equivalents at start of year XXX
Cash and cash equivalents at end of year XXX
Nasir Abbas FCA
Chapter - 11 IAS 7: STATEMENT OF CASH FLOWS – Formats (2)

CASH AND CASH EQUIVALENTS:

Opening Closing
Cash in hand XXX XXX
Bank balance XXX XXX
Bank overdraft / running finance (XXX) (XXX)
Short term investments XXX XXX
XXX XXX
EXAM NOTES:
1. Increase / decrease in debtors can be calculated in one of the following two ways:
(a) Movement in gross debtors (as done in above format)
= closing gross debtors + bad debt written off during the year – opening gross debtors
(b) Movement in net debtors
= closing debtors (net of provision) – opening debtors (net of provision)
Tips:
• If (b) is used then bad debt expense line will not appear in adjustments to profit before tax
• (a) is more practically used treatment however (b) is also acceptable in exams
2. Changes in all current assets and current liabilities are shown in this section except for followings:
(i) cash and cash equivalents
(ii) tax assets and liabilities
(iii) Dividend payable and receivable
(iv) Interest payable and receivable
(v) Any other asset or liability which is shown under investing or financing activities e.g. short term finance,
investment, payable for purchase of a PPE and current portion of loan etc.
Above items may be hidden in other current assets or liabilities (e.g. interest payable may be hidden in
“accrued expenses”). In this case exclude above items first while calculating working capital changes.
3. IAS 7 allows to show: Under Under

Dividend received Operating activities OR Investing activities

Interest received Operating activities Investing activities

Dividend paid Operating activities OR Financing activities

Interest paid Operating activities Financing activities

Workings
W–1 Profit before tax
Retained earnings

Cash dividend declared (W-2) XXX Open. Balance XXX

Bonus dividend XXX PAT XXX
Transfer to general reserve XXX Transfer from revaluation surplus XXX
Clos. Balance XXX

PBT = PAT + Tax expense (W-10)

W–2 Dividend paid

Dividend payable

Cash dividend paid XXX Open. Balance XXX

Clos. Balance XXX Cash dividend declared XXX

Note - Even if there is no information regarding dividend paid / declared in other information do not forget to prepare
“Retained earnings” account as it may give cash dividend declared as a balancing figure on debit side.

Nasir Abbas FCA

Chapter - 11 IAS 7: STATEMENT OF CASH FLOWS – Formats (3)

W–3 PPE
(i) PPE carried at cost / revalued amount:
PPE

Open. Balance (Cost / Revalued amount) XXX Disposal (Cost / Revalued amount) XXX
Revaluation (upwards) XXX Revaluation (downwards) XXX
Transfer from capital WIP (W-11) XXX Transfer to investment property (W-6) XXX
Transfer from investment property (W-6) XXX Clos. Balance (Cost / Revalued amount) XXX
Addition:
Cash XXX
Non cash XXX

Examples of non-cash additions – Trade in allowance and credit purchase.

Accumulated depreciation & impairment loss

Disposal (Acc. Dep) XXX Open. Balance XXX

Clos. Balance XXX Depreciation XXX
Impairment loss XXX

PPE Disposal

Cost / Revalued amount XXX Accumulated depreciation XXX

Profit on disposal XXX Sale price / Insurance claim XXX
Trade in allowance XXX
Loss on disposal XXX

(ii) PPE carried at NBV

PPE at NBV

Open. Balance (NBV) XXX Disposal (NBV) XXX

Revaluation (upwards) XXX Revaluation (downwards) XXX
Transfer from capital WIP XXX Depreciation XXX
Transfer from investment property XXX Transfer to investment property XXX
Addition: Impairment loss XXX
Cash XXX Clos. Balance (NBV) XXX
Non cash XXX
PPE Disposal

NBV XXX Sale price / Insurance claim OR XXX

Profit on disposal XXX Trade in allowance XXX
Loss on disposal XXX

Note – While working for PPE, do not forget to prepare accounts for “Capital WIP” and “Revaluation surplus”

W–4 Interest expense / paid

Interest payable

Interest paid XXX Open. Balance XXX

Clos. Balance XXX Interest expense for the year XXX

Nasir Abbas FCA

Chapter - 11 IAS 7: STATEMENT OF CASH FLOWS – Formats (4)

W–5 Bad debt expense

Provision for doubtful debts

Bad debts written off XXX Opening balance XXX

Closing balance XXX Bad debt expense for the year XXX

W–6 Investment property (carried at fair value model)

Investment property

Open. Balance (Fair value) XXX Disposal (Carrying amount) XXX

Fair value gain XXX Fair value loss XXX
Transfer from PPE XXX Transfer to PPE XXX
Addition XXX Clos. Balance (Fair value) XXX
Disposal

Carrying amount XXX Sale price XXX

Profit on disposal XXX Loss on disposal XXX

W–7 Interest income / Interest received

Interest receivable

Open. Balance XXX Interest received XXX

Interest income for the year XXX Clos. Balance XXX

W–8 Dividend income / Dividend received

Dividend receivable

Open. Balance XXX Dividend received XXX

Dividend income for the year XXX Clos. Balance XXX

W–9 Government grant (deferred income method)

Govt. grant

Taken to income XXX Open. Balance (non current) XXX

Grant repaid during the year XXX Open. Balance (current) XXX
Clos. Balance (current) XXX Grant received during the year XXX
Clos. Balance (non current) XXX

W – 10 Tax
Tax

Open. Balance (Advance tax) XXX Open. Balance (tax payable) XXX
Tax paid XXX Tax expense XXX
Clos. Balance (tax payable) XXX Clos. Balance (Advance tax) XXX

W – 11 Capital work-in-progress
Capital work in progress

Open. Balance (Cost) XXX Transfer to fixed assets XXX

Expenditure on capital WIP XXX Clos. Balance (Cost) XXX

Nasir Abbas FCA

Chapter - 11 IAS 7: STATEMENT OF CASH FLOWS – Formats (5)

W – 12 Investments
Investment at cost

Open. Balance (Cost) XXX Disposal (Cost) XXX

Addition XXX Clos. Balance (Cost) XXX
Disposal

Cost XXX Sale price XXX

Profit on disposal XXX Loss on disposal XXX

W –13 Capital

Share capital

Closing balance XXX Opening balance XXX

Right issue / New issue (cash) XXX
Non-cash issue (e.g. purchase of PPE) XXX
Bonus issue XXX

Share premium

Closing balance XXX Opening balance XXX

Bonus issue (only if issued out of premium) XXX Right issue / New issue (cash) XXX
Non-cash issue (e.g. purchase of PPE) XXX

Note – Bonus issue is by default made out of retained earnings (i.e. bonus dividend)

W –14 Loans
Loans

Loan repaid (principal only) XXX Open. Balance (current + non current) XXX
Clos. Balance (current + non current) XXX New loan XXX

[Direct method]
Company name
Statement of cash flows
For the year ended -----------------
Rs.’000’ Rs.’000’
Cash flow from operating activities:
Receipts from customers (W-1) XXX
Other receipts (e.g. rent received) XXX
Payments to suppliers (W-2) (XXX)
Payment for other operating expenses (W-3) (XXX)
Cash generated from operations XXX
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Remaining format after “cash generated from operations” is exactly
same as Indirect method
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Nasir Abbas FCA

Chapter - 11 IAS 7: STATEMENT OF CASH FLOWS – Formats (6)

W–1 Receipts from customers

Customers / Debtors

Opening balance (Gross) XXX Bad debts written off XXX

Sales (Total) XXX Receipts (balancing) XXX
Closing balance (Gross) XXX

W–2 Payments to suppliers

Creditors

Payments (balancing) XXX Opening creditors (Note) XXX

Closing creditors (Note) XXX Purchases (from COS a/c) XXX

Note – If accrued interest is included, then exclude it first before using here.

Cost of sales / Inventory

Opening stock XXX Cost of sales (Note) XXX

Purchases (balancing) XXX Closing balance XXX

Note – If depreciation is included, then exclude it first before using here.

W–3 Payment for other operating expenses

Operating expenses

Opening advances & prepayments (Note-1) XXX Opening accrued expenses (Note-2) XXX
Payments (balancing) XXX Operating expenses (Note-3) XXX
Closing accrued expenses (Note-2) XXX Closing advances & prepayments (Note-1) XXX

Notes:
1. If advance income tax is included, then exclude it first before using here.
2. If accrued interest is included, then exclude it first before using here.
3. Operating expenses = Admin expenses + Distribution cost + Other expenses – Depreciation – Amortization
– Bad debt expense – Impairment loss – loss on disposal of asset – Fair value loss on investment property –
Revaluation loss (P&L)

Nasir Abbas FCA