Companies

Cash flow statement

Cash from operations starts at profit, adds back depreciation, and subtracts an increase in inventory. Buying a vehicle is an investing outflow, not an operating expense.

CAPS

Grade 12 · Accounting · Companies

Accounting is a system: document, journal, ledger, then the statement.

  • The papers

    Grade 12 Paper 1 is company financial statements, cash flow, and analysis with audit and ethics. Paper 2 is reconciliations, VAT, inventory and manufacturing or fixed assets as the paper sets them.

  • The logic

    Assets equal owner’s equity plus liabilities. Every entry needs a source. VAT on sales is output VAT. VAT on qualifying purchases is input VAT. Profit is not the same as cash.

  • The relation

    Operating cash = profit + depreciation − increase in inventory. A vehicle purchase is investing, not operating

  • How a marker reads it

    Do not calculate 15% VAT on the profit. This topic is the cash flow statement.

Each paper is 150 marks. A foreign total that does not balance is wrong even if the individual entries look neat. Show the note or the calculation the face of the statement came from.

Worked example

A company reports a profit of R40000. Depreciation is R4000. Inventory increased by R4000. A vehicle was bought for R12000 cash. Calculate cash from operations and say where the vehicle goes.

Simplified approach

Cash from operations starts at profit, adds back depreciation, and subtracts an increase in inventory. Buying a vehicle is an investing outflow, not an operating expense.

Culture note

A company in East London, preparing the cash flow statement.

Formulas

Operating cash=profit+depreciation−increase in inventory

A vehicle purchase is investing, not operating

Step 1 / 6

Start at profit

Profit is R40000. Depreciation of R4000 did not use cash, so add it back.

Why this step: We only do one job per line so a marker can follow the marks — and so you can find a slip without starting over.

4. Step-by-step working

  1. 01

    Inventory

    Inventory rose by R4000, which used cash. Subtract it. Operations = R40000.

  2. 02

    Step F — Box the answer with its unit

    Cash from operations = R40000 + R4000 − R4000 = R40000. The vehicle of R12000 is an investing outflow.

More worked examples

Board walkthroughs on this topic. Open one, copy the working, then try the next.

Example 1 / 20

Debtors increased from R40 000 to R52 000. Show the effect on cash from operating activities.

How we got there

Read this like a teacher at the board. We go slowly, name every number, and say why we take each step.

Explain in another language · 11

1. What is the question asking?

Read the question twice. Circle the unknown. Underline every number and unit. The paper is asking: Debtors increased from R40 000 to R52 000. Show the effect on cash from operating activities.

In other words — as if you have never seen this before

If you have never seen this before: Increase in current assets = cash outflow. We will name a method in words, write the formula with no numbers, then substitute one line at a time.

2. What do we already know?

Debtors up R12 000.

3. Which method — and why this one?

Increase in current assets = cash outflow.

4. Step-by-step working

  1. 01 / 05

    Subtract

    52 000−40 000=R12 000.

    Why this step: We only do one job per line so a marker can follow the marks — and so you can find a slip without starting over.

  2. 02 / 05

    Identify the given

    Show (12 000) — less cash collected.

    Why this step: We only do one job per line so a marker can follow the marks — and so you can find a slip without starting over.

  3. 03 / 05

    Step G — Sense-check the size

    Ask: is this the kind of number a Grade 10–12 paper would want? A speed of 3 000 ms for a learner walking, or a probability bigger than 1, means a unit or algebra slip. Estimate first: round the numbers and do the sum in your head.

    Why this step: Markers write ‘unrealistic’ in the margin when the method is right but the size is wild. A 10-second head check often finds a missing 10² or a unit that never changed.

  4. 04 / 05

    Step F — Box the answer with its unit

    Outflow (R12 000).

    Why this step: A number without a unit is half a mark on a Physics paper, and a marker can miss a Maths answer that is buried in working.

  5. 05 / 05

    Step H — What the marker is looking for

    On an NSC memo you usually earn: (1) a method mark for naming the right formula or idea in words, (2) an accuracy mark for substituting the given numbers with units, (3) an accuracy mark for the boxed answer with its unit. Write those three lines even if you are unsure of the arithmetic — blank pages score zero.

    Why this step: First-timers chase the final number and leave the method blank. The memo still pays out for the idea and the substitution even when the last line is wrong.

5. The answer

Outflow (R12 000).

Copy onto your answer sheet — in this order

Answer: Outflow (R12 000).

6. Check it like a marker

Decrease in debtors would be an inflow.

7. A trap first-timers fall into

First-timers often grab the first formula they remember, mix units (cm with m, minutes with seconds), or drop a minus sign. Write the formula in words first: “this equals that, because…”

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