Question

2019 2018 Statement of financial position as at 31 December 2019 2019 2018 £000 £000 E000 £000 Assets Property Plant and Equipment 13,073.00 12.570.50 (NBV) Investments 3,550.00 Current Assets Inventory 8,243.50 7.946.00 Receivables 6,173.50 4,052.00 Cash and cash equivalent 431.50 14,848.50 362.00 12.360.00 Total Assets 31.471.50 24.930..50 Equity and Liabilities Share Capital Share Premium Revaluation Reserve Retained Earnings Non Current Liabilities Current Liabilities Trade Payables and others Total Equity and liabilities 6,500.00 6,250.00 1,325.00 12.388.00 5,000.00 2,500.00 1,325.00 26,463.00 11,428.00 20,253.00 1,625.00 2,125.00 3,383.50 31.471.50 2.552.50 24.930.50 Statement of Profit or Loss for the year ended 31 December 2019 £000 Turnover 37,340.00 Cost of goods sold (25.797.50) Gross Profit 11,542.50 Operating expenses (8,840.50) Operating profits 2,702.00 Taxes (1,317.00) Net profit attributable to shareholders 1.385.00 Other information 1. Property plant and Equipment for the year 2019 consisted of freehold land worth £10.15 million and the remaining attributable to machinery and equipment and recorded at its net book value. Similarly, the 2018 had £9.89 million attributable to freehold land and the remaining was machinery and equipment recorded at its net book value. BUSI 2150-E1 7 BUSI2150-E1 2. During the year 2019 King Plc purchased machinery and equipment worth £682,500 whereas there were no disposals of non current assets. 3. The trade payables and others for the two years consisted of the following 2019 2018 £000 £000 Trade payables 1,385.50 1,316.00 Accruals 600.00 617.50 Tax payables 1,398.00 619.00 4. There were no other movements to/from retained earnings other than dividend payments and net profits for the year. Required: a. Prepare the Statement of Cash Flows in accordance with IAS 7 for the year ended 31 December 2019 using the indirect method for King Plc. (19 marks) b. The cash flow statements has three parts namely the operating activities, financing activities and the investing activities. Justify the importance of each of these parts in critically reviewing companies' financial statements. (9 marks) C. Justify why accrual basis of accounting is perceived to be better than cash basis of accounting?