Hamid prepares his business financial statements to 31 May each year. Because he attended an accounting course at college he knows how to prepare profit and loss accounts and balance sheets. However, the course did not include the preparation of cash flow statements and Hamid asks you to prepare a cash flow statement for his business for the year ending 31 May 20X2. He supplies you with the following information:

Hamid: Profit and loss account (summarised) for the year ending 31 May 20X2 fe

= Sales 437 500 Less: cost of sales (298 423)

226 SECTION 2. FINANCIAL ACCOUNTING

£

Gross profit 139.077 Expenses excluding depreciation (62 505)

Depreciation (7 662)

Operating profit 68 910 Interest received 634 Interest paid (506)

Net profit 69 038 Hamid: Balance sheets at 31 May 20X2 and 31 May 20X1 20X2 20X2 20X1 20X1 f£ £ f£ £

Fixed assets At cost 82 610 38.750 Less: accumulated depreciation (21 462) (13 800)

61 148 24 950 Current assets Stock 26 980 27 420 Debtors and prepayments 44 349 42 760 Cash at bank ae joel 6 642 76 683 76 822 Current liabilities Loan —- 5 000 Creditors and accruals 23° 730 28 459 23 730 33 459 Net current assets 52.953 43 363 114 101 68 313 Capital Capital brought forward 68 313 33 766 Profit for the year 69 038 63 291 Drawings (23 250) (28 744)

114 101 68 313 Note the following:

1. There were no disposals of fixed assets during the year.

2. — Following your request Hamid supplies the following information relating to cash receipts and payments during the year: cash receipts = £435 911: cash payments = £365 217.

| You are required to prepare Hamid’s cash flow statement for the year end-

Ing 31 May 20X2 using

a) the indirect method; and

b) the direct method.