Cases
Practical case
Maison Ternaval SA (fictitious entity) distributes professional kitchen equipment. Management wishes to present the 20X8 operating cash flows under the direct method, which the standard encourages, by rebuilding receipts and payments from the statement of profit or loss and the changes in balances.
Your assignment
Explain the direct method and its sources; compute the receipts from customers, the purchases and the payments to suppliers, and the payments to employees; present the operating section down to the net cash flow and cross-check it with the indirect method starting from operating profit; present the entries for the payment of tax and interest and their effect, locating interest paid in the statement; conclude.
Work on this file as you would in practice: read the situation, open the documents, sort the useful information, then carry out the work requested. The solution is revealed once you submit.
Intermediate level: help remains available, on demand.
Method
File checklist
4 documents: open each one to read it.
Document 1Table
Balances at 31 December 20X7 and 20X8 (EUR): trade receivables 640,000 and 715,000; inventories 820,000 and 905,000; trade payables 510,000 and 548,000; employee benefit payables 82,000 and 95,000; current tax payable 30,000 and 25,000. No interest payable at either date.
The figures of the documents, gathered for your work.
| Item | Value | Found in |
|---|---|---|
| Trade receivables at the beginning | €640,000.00 | |
| Trade receivables at the end | €715,000.00 | |
| Inventories at the beginning | €820,000.00 | |
| Inventories at the end | €905,000.00 | |
| Trade payables at the beginning | €510,000.00 | |
| Trade payables at the end | €548,000.00 | |
| Employee benefit payables at the beginning | €82,000.00 | |
| Employee benefit payables at the end | €95,000.00 | |
| Current tax payable at the beginning | €30,000.00 | |
| Current tax payable at the end | €25,000.00 | |
| Revenue | €5,200,000.00 | |
| Cost of sales excluding depreciation | €3,380,000.00 | |
| Employee benefits expense | €960,000.00 | |
| Other operating expenses | €340,000.00 | |
| Depreciation | €150,000.00 | |
| Interest expense | €40,000.00 | |
| Operating profit | €370,000.00 | |
| Current tax expense | €85,000.00 | |
| Net charge to provisions | €30,000.00 | |
| Other operating expenses paid | €310,000.00 | |
| Budgeted revenue 20X9 | €5,800,000.00 |
Not every document matters: identify those that affect the accounting treatment.
Part 1 · Classification · Analysis
Sort each document: does it affect the accounting treatment?
Drag each item into its category, or tap the category under the item.
Comparative balances
Statement of profit or loss 20X8
Year-end note
Budget 20X9
8 tasks in the order of the file. Calculations, entries and effects on the financial statements are marked; written answers are self-assessed against the solution.
Task 1Analysis
What is the direct method and how are its amounts obtained?
Task 2Calculation
Compute the cash received from customers.
Part 1 · Calculation
Compute the cash received from customers.
Task 3Calculation
Compute the purchases of the period and the cash paid to suppliers.
Part 1 · Calculation
Compute the purchases of the period and the cash paid to suppliers.
Result: Cash paid to suppliers
Task 4Calculation
Compute the cash paid to employees.
Part 1 · Calculation
Compute the cash paid to employees.
Task 5Analysis
Present the operating section down to the net cash flow and check it with the indirect method.
Part 1 · Calculation
Present the operating section down to the net cash flow and check it with the indirect method.
Result: Non-cash items
Task 6Journal entries
Present the entries for the payment of tax and interest.
Part 1 · Journal entry · Journal entries
Entry 1 of 2
One line = one account and one side. Add a line if the entry needs more; the balance check updates live.
Line 1
Line 2
Part 2 · Journal entry · Journal entries
Entry 2 of 2
One line = one account and one side. Add a line if the entry needs more; the balance check updates live.
Line 1
Line 2
Task 7Effects on the financial statements
What is their effect on the financial statements?
Part 1 · Classification · Analysis
State the direction of the effect on each financial statement aggregate.
Financial position (balance sheet)
Profit or loss
Other comprehensive income
Equity
Part 2 · Calculation · Analysis
Quantify the effect on the aggregates concerned.
Task 8Conclusion
Write the conclusion.
Your working draft for this file: points noted, leads, intermediate calculations.
Saved on this device only; never graded.
Complete every item of the file to submit it (0 / 12).
Document this file
These working papers use the data and results of this case.
Normative references