Separation of Duties in Cash Handling and Recording | Cash Flow

School: La Trobe University - Course: ACC 101 - Subject: Accounting

Review questions 1.Separation of duties of receiving and paying cash. • Separation of duties of recording cash receipts from cash payments. • Separation of handling of cash and the recording of cash movements in the accounting records. 2.Information provided by statements of cash flows includes: • new issues of shares • debt raised or repaid during the year • assets acquired (or disposed of) during the year and the source of funding of such purchases • ability of the firm to meet its debts or pay dividends • cash flows from operating, investing and financing activities. 3.Operating cash inflows • Sales • Fees for services • Interest and dividends • Operating cash outflows • Payments to suppliers • Payments to employees • Payments for rates • Payments for electricity, rent etc 6.Investing cash outflows - buying PPE, long term investment, cars. Investing cash inflows- selling PPE, liquidate long term investments, selling cars. 7.Financing cash inflows - long term borrowing from bank, issuing shares, issuing debentures. Financing cash outflows- repay borrowings, buy back shares pay dividends. Problems for discussion and analysis 4. a)The reduction in salaries payable would be deducted from net profit to arrive at the net cash flow from operating activities. b) i.The $1000 would be a cash inflow in the investing activities and the gain on sale would be subtracted from net profit to arrive at the net cash flow from operating activities. ii.No effect c)The increase in accounts payable would be added to net profit to arrive at the net cash flow from operating activities. d)This would result in a cash inflow for financing activities of $240 000. e)This would be reported as a non-cash financing and investing activities.

6. 8. a)Investing cash inflow b)Operating cash outflow c)Operating cash inflow d)Financing or operating cash outflow e)Non-cash investing financing transaction f)Operating cash outflow g)Investing cash outflow h)Not recorded as a cash flow as it is part of the cash management i)Financing cash inflow j)Financing cash inflowTransactionActivity aReceived cash from customersOperating bPaid employees for wagesOperating cSigned a four-year lease agreement for a motor vehicleNon-cash or financing dPaid interestOperating eIssued debenturesFinancing fIssued ordinary sharesFinancing gSold long-term investmentsInvesting hPaid cash dividendsFinancing iRedeemed debenturesFinancing jIssued preference sharesFinancing kSold equipment for a gainInvesting lPurchased buildingsInvesting mPurchased patentsInvesting nLoss on disposal of a non-current assetInvesting oIncrease in inventoryOperating