The following extract is taken from a draft version of company’s statement of cash flows, prepared by a trainee accountant.
$000
Net cash flow from operating activities Profit before tax Depreciation charges 484
Profit on sale of property, plant and equipment 327
Increase in inventories 35
Decrease in trade and other receivables (74)
Increase in trade payables (41)
Cash generated from operations 29
760
Four possible mistakes that may have been made by the trainee accountant are listed below.
1 The profit on sale of property, plant and equipment should be subtracted, not added.
2 The increase in inventories should be added, not subtracted.
3 The decrease in trade and other receivables should be added, not subtracted.
4 The increase in trade payables should be subtracted, not added.
Which of the four mistakes did the trainee accountant make when preparing the draft statement?
