Exam 7: Amounts Receivable and Amounts Payable

What is the effect of a bad debt on the statement of financial position, the income statement and the cash flow statement?

Chris runs a business as a conference organiser and in the period ran a major conference which earned fees of £60000 of which £55000 was received in advance. Of the remaining £5000 all except £400 is collectable. He paid out £12000 on account for venue hire and still owes £2000. In addition he owes £900 for catering and also owes money for internet charges which he estimates to be around £600 although the bill for this has yet to be received. What are the balances on the receivables and payables accounts at the end of the period?

An increase in payables means that the profit will be less than the cash flow.

Chris runs a business as a conference organiser and in the period ran a major conference which earned fees of £60000 of which £55000 was received in advance. Of the remaining £5000 all except £400 is collectable. He paid out £12000 on account for venue hire and still owes £2000. In addition he owes £900 for catering and also owes money for internet charges which he estimates to be around £600 although the bill for this has yet to be received. -What was the net cash flow of Chris's business for the period?

Hazel's business bank account was overdrawn by £3000 and she has £6000 owing to her from customers. During the period she receives cheques for £5 200 and hears that a customer who owed her £300 has been declared bankrupt. What is the effect of the above transactions on net assets ?

What would be the effect of the return of goods previously sold on credit before payment is received on the statement of financial position, the income statement and the cash flow statement?

A business had receivables of £200 at the start of the period sells £4000 of goods on credit and receives payments of £ 3 500 in the period. What are the receivables at the end of the period?

A prepayment is money received from a customer in advance.

An increase in trade payables reduces the cost of sales.

What is the effect of an accrual in respect of electricity used during the period on the statement of financial position, the income statement and the cash flow statement?

An increase in receivables means that the profit will be less than the cash flow.

An accrual is a current asset.

Trade payables are expenses of the year in which they arise.

Accruals are estimates of known liabilities for which invoices have not been received.

A sales return should be treated in the same way as a bad debt.

Having calculated the profit for the year you find that the owner has withdrawn goods which had been included as part of inventory for personal use. What is the effect of this?

A bad debt should be taken off the figure or sales revenue.

The difference between cash flow and profit can be attributed in part to changes in payables and receivables.