Answer Happy

Lekorlas Sdn. Bhd. Cash Flow Statement for the year ended December 31, 2017 Cash Flow from Operating Activities Net profit Adjustments to earn cash from operations: Depreciation Gain from sale of machine Changes in working capital Decline in trade receivables Increase in inventory of merchandise Decrease in trade payables Decrease in accrued spending Net cash flow from operating activities Alir tunai dari aktiviti pelaburan Cash receipts from machine sales Cash payment for equipment purchase Net cash flow from investment activities Cash flow from financing activities Payment of cash dividends Net cash flows are used in financing activities RM 150,000 30,000 (15,000) 8,000 (16,000) 14,000 (7,000) 75,000 (45,000) (40,000) RM 164,000 30,000 (40,000) Net increase in cash and cash equivalents Cash balances and cash equivalents as at 1 January 2017 Cash balances and cash equivalents as at 31 December 2017 After examining the Cash Flow Statement above, En. Lazim has contacted you to seek clarification on some of the following questions that have confused him: Be required: Give an explanation to questions 1 to 4 submitted by En. Common. 154,000 66,000 220,000 1. Why is it necessary to attach a Cash Flow Statement when the bank can determine the movement in cash by looking at the difference between the initial cash balance and the final cash balance? 2. What is the difference between operating activities, investment activities and financing activities? 3. Why is it necessary to show cash flows for operating activities, investment activities and financing activities separately when they are all business activities? 4. Why is it necessary to make an adjustment to net income to earn cash from operations when net income already takes into account all cash inflows and outflows?