Cash Management Question

Clarekaye

Hi all,

Soon do take cash management and just going through everything to make sure I get it (or try anyway!) I have a depreciation query, I am doing the 4th aat assesment online and question 1.2 is

The carrying amount of property etc is £155230 at the 1st Jan and £155230 at the 31st March, the income statement includes depreciation of £8900 what is the cash paid for property etc in the 3 month period.

My question is how come you add back in the depn to get the right answer is this because the carrying amount includes it??

Also to anyone who has taken it recently is it as hard as the mocks, I almost run out of time on each mock cos I work everything out on paper first :crying:

Tjcgti

Hi Clare,

With regards to the question the carrying amount as at 1st January should be £142,400.

Depreciation is added back in because the carrying amount on the Balance Sheet doesn't include the depreciation cost as this is an expense which is charged to the P & L.

The total increase in carrying amount is £12,830 which is what would be showing on the Balance Sheet. However depreciation is not actual cash loss and is then added to the difference in carrying amounts.

£12,380 + £8,900 = Actual cash paid.

Just to let you know, I am terrible at explaining things so if I have the above worded wrong or it doesn't make sense please let me know...

(hope this helps)

Tristan