Cash Disclosure in Statement of Cash Flows for Moletji Limited
What is the correct amount that must be disclosed as an increase/decrease in trade payables in the cash generated from operation section of the statement of cash flows of Moletji Limited for the year ended 31 December 2020?
A: 9,700
B: - (92,300)
C: 92,300
D: - (9,700)
Correct Amount for Trade Payables in Moletji Limited's Cash Generated from Operation Section
Based on the given alternatives, the correct amount that must be disclosed as an increase/decrease in trade payables in the cash generated from operations section of the statement of cash flows for Moletji Limited for the year ended 31 December 2020 would be:
B: - (92,300)
The negative sign indicates a decrease in trade payables. In the statement of cash flows, changes in trade payables are recorded under the operating activities section as an adjustment to net income to reflect the cash flow impact of changes in the company's trade payables.
A decrease in trade payables suggests that Moletji Limited has paid off some of its outstanding obligations to suppliers during the year. This would result in a reduction of liabilities and an outflow of cash, which is why it is recorded as a negative amount.
By choosing option B, we are indicating that the company has experienced a decrease in trade payables amounting to 92,300. This information is crucial for understanding the cash flow generated from operating activities and provides insights into the company's working capital management and cash flow position.
It's important to note that the specific context of Moletji Limited's financial statements should be considered to confirm the accurate amount of the change in trade payables.
What does the term "cash" refer to?
A: Coins and notes only
B: Cash-like assets
Understanding the Concept of Cash
Based on the options provided, the correct amount that must be disclosed as an increase/decrease in trade payables in the cash generated from operation section of the statement of cash flows is option A: 9,700.
Cash is a term used to describe tangible currency such as coins and notes, as well as easily accessible funds that are kept in bank accounts or other liquid instruments that facilitate transactions and fulfill financial commitments. It acts as the epitome of easily transferable and widely-accepted currency, facilitating trade and commerce as a means of exchange.
Cash comprises not only actual coins and notes but also cash-like assets that hold high liquidity and can be effortlessly transformed into cash within a three-month timeframe or shorter. Therefore, option A is the correct choice for the definition of cash.