Below are the position statements of Kams business, who operates as a sole trader. The

statements relate to year ending 31st of May 2019 and 31st of May 2020:

	2019	2020
Non-Current Assets
Fixtures and Fittings (note 1)	21,600	30,600
Current Assets
Inventory (stock)	49,500	81,00
Receivables (debtors)	6,750	13,950
Bank	7,650
Total Assets	85,500	125,550
Current Liabilities
Payables (creditors)	22,500	24,750
Bank Overdraft		19,800
Non-Current Liabilities
Long term Loans
Equity
Capital	45,000	63,000
Profit	78,750	99,000
Less Drawings	60,750	81,000
	63,000	81,000
Total Liabilities and Equity	85,500	125,550
Note 1	2019	2,020
Fixtures and Fittings
Cost	27,000	45,000
Less Accumulated Depreciation	5,400	14,400
Net Book Value	21,600	30,600

Additional Notes:

Interest charged and paid during the year ending 31st May 2020 was 2,050.

There were additions of assets within the year ended 31st May 2020 paid in cash.

There were no disposals of assets during the year ended 31st May 2020.

(a) Prepare a bank reconciliation statement for 2020: Show the cash balance at the start of the year, cash

movement in the year and resulting cash balance at the end of the year.

(b) Given that there was a decrease in cash, prepare a statement of cash flows (in line with IAS 7) for

year ending 31st May 2020 proving the decrease. Use the indirect approach when deriving net cash flow

from operating activities.

(c) Briefly discuss why the business started the year with money in the bank account but ended it with an

overdraft.

(d) Explain the difference between profit and cash flows using examples from the statement of cash flows

you have prepared above.