Question 1

Cygnet Car Repairs had the following cash transactions over the financial year ending 30 June 2022. Opening cash balance, 1 July 2021 is $10 000.

Transaction	Amount
Acquisition of building	$575,000
Received loan funds	$250,000
Payment to employees	$42,800
Income Tax paid	$3,250
Sold machinery	$210,000
Drawings	$5,000
Paid bank interest	$2,529
Paid suppliers for inventory	$107,075
Cash sales	$205,350

Prepare a Cash Flow statement for Cygnet Car Repairs for the year ending 30 June 2022 using the information provided.

[6 marks]

Explain why sales made on credit terms are not included in the Cashflow Statement. Your answer should include an explanation of the difference between accrual and cash accounting (max 300 words).

[5 marks]

Explain whether this business could possibly have a profit in the Income Statement. Explain your answer by providing an example. (max 300 words).

[4 marks]