1. STORES LEDGER

The choice of inventory costing method is an important one for companies since consequence of the choice is apparent in both the balance sheet and the income statement. In periods of raising prices, companies choosing the income-reducing method of Last-in-First-out (LIFO) also leave the lower earlier prices in their inventory values.

This results in inventory values in the balance sheet that are based on the older prices, the LIFO method results in lower net incomes and also lower values in the current assets. The only advantage to choosing this method is the lower tax expenses based on the lower income. The American tax code requires the use of the LIFO method for financial reporting purposes if that method is used for tax purposes. When used for tax purposes, LIFO with its lower reported incomes correspondingly results in substantial tax savings for companies with large amounts of inventories, typically most large merchandising and manufacturing companies in the economy. With the understanding of these answer the below questions.

1. Problem:

From the following information , prepare stores ledger Account under FIFO Method(10 Marks)

2019 Particulars

Jan1 Received 600 Units at BD10 per unit

Jan10 Received 200 Units at BD 34 per unit

Jan15 Issued 600 Units

Jan20 Received 200 Units at BD18 per unit

Jan25 Issued 500 Units

Jan28 Received 700 Units at BD22

2. Problem:

From the following information , prepare stores ledger Account under LIFO(10 Marks)

2020 Particulars

March1 Received 600 Units at BD22 per unit

March10 Received 500 Units at BD 14 per unit

March15 Issued 400 Units

March20 Received 600 Units at BD28 per unit

March28 Received 200 Units at BD22 per unit

March31 Issued 300 unit.

B.CASH FLOW STATEMENT

Comparative statements of cash flows hold clues to a companys earning potential, risk, and liquidity. These statements show the repeatability of the companys sources of funds, their costs, and whether such sources may be relied on in the future. The uses of funds for growth and for maintaining competitive position are revealed. An analysis of comparative Statements of Cash Flows helps in understanding the entitys current and prospective financial health.

It facilitates planning future ventures and financing needs. Comparative data help the Financial Manager, Controller and CFO identify abnormal or cyclical factors and changes in the relationship among each flow element. The statement is a basis for forecasting earnings based on plant, property, and equipment posture. It assists in appraising growth potential and incorporates cash flow requirements, highlighting specific fund sources and future means of payment. Will the company be able to pay its obligations and dividends?

The statement reveals the type and degree of financing required to expand long-term assets and to bolster operations. The Financial Manager, Controller and CFO should compute for analytical purposes cash flow per share equal to net cash flow divided by the number of shares. A high ratio indicates the company is liquid.

3. What are the three types of cash flows presented on the statement of cash flows?(5 marks)
4. Explain any differences between partnership and sole proprietorship(10marks)
5. Identify whether each of the following items would appear in the operating, investing, or financing activities section of the statement of cash flows. (5 marks)

1. Cash payments for equipment
2. Cash receipts from sales of goods
3. Cash dividends paid to shareholders
4. Cash payments to employees
5. Cash payments to lenders for interest on loans

6. Prepare Indirect Method of cash flow statement( 10 Marks)

Liability	2017	2018	Asset	2017	2018
Share capital Creditors(CL) Profit and loss a/c	200000 70000 12000	250000 40000 23000	Cash/Bank (CA) Debtors(CA) Stock(CA) land	30000 120000 80000 52000	42000 115000 90000 66000
	282000	313000		282000	313000