Accounting 9706 · AS & A Level · Preparation of financial statements

Preparation of financial statements — practice question

This question is about how to prepare a statement of cash flows and how to use it.
(a)[2]

Explain the meaning of the term ‘cash equivalents’.

(b)[14]

Prepare the statement of cash flows for the year ended 31 December 2021 in accordance with IAS 7.

(c)[4]

Explain two reasons why a business prepares a statement of cash flows alongside an income statement and a statement of financial position.

(d)[5]

Advise the directors whether the finance director was right to use a bank overdraft to finance the purchase of non-current assets. Support your response.

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