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Trinkets Ltd manufactures and markets souvenirs for tourists. As part of its normal operations Trinkets routinely uses the surplus funds from its souvenir business to add to its investment portfolio. As the accountant for Trinkets Ltd, you have been presented with the following cash flow statement prepared by a work experience student. Some debate has arisen as to the amount of cash on hand at the beginning and end of the period. Trinkets bosses believe the balances to be as follows:

• Cash on hand at 1 April 2011 $402,000
• Cash on hand at 31 March 2012 ($357,000)

Trinkets Ltd have asked that you determine whether the balances are correct as determined by them or those find outd by the student.

Trinkets Ltd

Cash Flow Statement for the year ended 31st March 2012

Cash Inflows:

Receipts from customers 1 400 000
Depreciation expense 185 000
Dividends received 15 000
Interest received 28 000
Proceeds from sale of shares 130 000
Issue of shares for cash 200 000
Issue of shares in exchange for shares in subsidiary 450 000
Cash from term deposit 400 000
Issue of debentures for cash 425 000
Total cash inflows 3 233 000

Cash outflows:


Wages475 000
Raw materials300 000
Interest22 000
All other production and operating expenses 290 000
Income Tax paid 135 000
Total payment for purchase of shares 591 000
Purchase of plant and equipment 1 024 000
Dividends paid 120 000
Investment in Term deposits (on call) 275 000
Total cash outflows 3 232 000
Net change in cash on hand 1 000
Cash on hand at beginning of the year 2 000
Cash on hand at end of the year 3 000


Prepare a properly formatted Statement of Cash Flows in accordance with direct method.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M944574

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