What does O.A and F.A and I.A mean in this cash flow statement?

Question

Required:

Prepare a cash flow statement for Rellis Limited for the year ended 31 December 2007 in

accordance with IAS 7 using the direct method.

Solution

Notes to the cash flow statement 31/12/2006 Cash outflow

cash & cash equivalents 1,100 -860

Working:

Cash receipts from customers

Opening debtors €2,130

Sales 24,000

Less closing debtors (€2,310+€260 Prov bd) -2,570

Cash received from customers 23,560 (O.A)

Cash paid to suppliers

Opening stock €1,800

Purchases... By deduction 14,100

Less closing stock 2,400

Cost of sales 13,500

Opening creditors €1,020

Purchases ... from above 14,100

Less closing creditors -1,260

Cash paid to suppliers 13,860 (O.A)

Disposal of equipment

NBV (€2,400,000-€800,000) €1,600

Profit on disposal 300

Proceeds from disposal €1,900 (I.A)

Answer 1

If I remember my IFRS/IAS cashflow properly, the O, F and I stand for Operating, Financial and Investment, and the A is Activites.

So: Operating Activities cashflows are basically cash generated from your usual day to day trade, e.g. selling stuff to customers and then buying more stuff, paying off your trading debts/creditors, collecting cash etc.

Financial Activities: Would (I think!!) be things like paying off long term loans or taking on new finance.

Investment Activities would be buying and selling your fixed assets (like plant and machinery, vehicles or investments in other companies), and the associated cashflows.