How Do You Answer Cash Flow Statement Questions in ACCA FR?

Statement of cash flows questions are a regular feature of ACCA FR, and they're some of the most method-driven marks in the paper. Under IAS 7 the format is fixed, so if you know the proforma and work carefully through the adjustments, these are reliable, bankable marks. The key is a disciplined, well-laid-out approach.

Start with the proforma

Lay out the three sections before you calculate anything: operating activities, investing activities and financing activities. Most FR questions use the indirect method for operating activities, starting from profit before tax and adjusting back to cash.

Work through operating activities carefully

• Add back non-cash items: depreciation, amortisation, impairments and losses on disposal.
• Adjust for working-capital movements: changes in inventory, receivables and payables.
• Remove items shown elsewhere: interest and tax are adjusted here and shown as actual cash paid.

Reconstruct the tricky balances

The marks in the harder parts come from reconstructing balances using T-accounts or working notes — tax paid, interest paid, PPE additions, dividends paid. Set up a quick working for each, put in the opening and closing balances and the profit-or-loss charge, and solve for the cash figure.

Common mistakes to avoid

• Getting the sign wrong on working-capital movements (an increase in receivables is a cash outflow).
• Using the charge for the year instead of the actual cash paid for tax and interest.
• Netting off additions and disposals of non-current assets instead of showing them separately.

Because so many of these marks are method marks, showing clear workings protects your score even if one figure is off. Practising full cash flow questions and marking them against the official ACCA scheme with The 50% Club shows you exactly which adjustments cost you marks — the fastest way to make these questions a strength.