QUESTION 2 REQUIRED (a) Prepare a fully classified income statement and cash flow statement for the.

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QUESTION 2

REQUIRED
(a) Prepare a fully classified income statement and cash flow statement for the year ending 30 June 2018 based on the information above. Fully state any assumptions you have made in preparing these financial reports.
(b) Upon completing the cash flow and income statement On Time management are confused in that the Income Statement is indicating they made a net loss (negative profit) over the same period whilst reporting a positive cash inflow from operations. With reference to the question and your work in answering (a) above explain to On Time management providing two possible reasons why this discrepancy could occur when comparing cash flow from operations (cash profit) with accrual accounting profit/ loss. For each cause identified high light the impact on profit versus cash flow to explain potential differences (80 word limit)
(c) Given the above differences discuss which statement (Income Statement or Cash Flow from Operations) better reflects the financial performance / wealth creation for the period ending 30 June 2016. (Justify your answer with reference to accrual accounting) (80 word limit)

Item

$

Interest paid for the   year

4,000

Dividends paid to   Shareholders

30,000

Profit on sale of truck

25,000

Cash at bank at July 1,   2017

1,000,000

Depreciation for the year

150,000

Payment for Motor vehicle   purchased on 28th April 2018

40,000

Loan repayments made

70,000

Tax expense / paid to the   Tax Office

78,000

Salaries Paid

250,000

Cash received from the   sale of a truck

90,000

Delivery Income – Cash   Receipts for year ending 30 June 2018

650,000

Dividend received from   investment

200,000

Cash for Shares in   companies listed on the ASX (Australia Security Exchange)

50,000

Cash received from   accounts receivable customers

300,000

Bad Debts expense

10,000

Other cash operating   expenses

77,000

Credit purchases of fuel   for the year ending 30 June 2018

480,000

Fuel Stock – petrol   1/7/2017

400,000

Fuel Stock – petrol   30/6/2018

150,000

Payments to suppliers for   prior purchases on credit

200,000

Delivery Income  -   On Credit to account customers for the year ending 30 June 2018

150,000

Money borrowed from Net   Bank

50,000

Purchase of property and   land for cash

700,000

On Time Ltd is a parcel delivery business. Detailed below is selected information for the financial year ending 30 June 2018.

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