Below, you will find two important documents: the opening statement of financial position and a provisional trial balance for the fictional company.
Remember that the trial balance has been prepared at the end of the year, but note that the retained earnings and inventories balances included are still those figures relating to the start of that year.
Additional information:
An inventory count established that the value of closing inventories on 31 December 2009 was £6,000.
All of the dividends declared during 2009 (and charged as an expense) were paid in that same year, as was the interest expensed for 2009.

Statement of financial position as of 31 December 2008
                                                                     £             £
Non-current assets
Land                                                                         10,000
Buildings                                                    15,000
Less: Accumulated depreciation             (8,000)
                                                                                    7,000
Investments                                                             12,000
                                                                                 29,000
Current assets
Inventories                                                 4,000
Accounts receivables                               5,000
Cash and cash equivalents                      68,000
                                                                  77,000
Current liabilities
Accounts payable                                        25,000
Tax payable                                                 5,000
                                                                     30,000
Net current assets                                                       47,000
Total assets less current liabilities                            76,000
Equity
Common stock                                                             50,000
Retained earnings                                                       26,000
                                                                                    76,000

Trial Balance: 31 December 2009                   £             £
Accounts                                                       Debit       Credit
Cash and cash equivalents                         57,000
Sales revenues                                                             95,000
Purchases                                                       22,000
Long-term investment                                  15,000
Accounts payable                                                          19,000
Opening inventory (01.01.09)                         4,000
Land                                                             10,000
Buildings                                                       18,000
Accumulated depreciation                                              9,000
Accounts receivable                                     10,000
Depreciation expense                                     1,000
Utilities expense                                           20,000
Tax expense                                                    3,000
Interest expense                                              1,000
Tax payable                                                                      2,000
Wages expense                                              40,000
Common stock                                                                50,000
Retained earnings at start of year (01.01.09)                26,000
Totals                                                             201,000    201,000

Required:
1. Using the above information, prepare an income statement for the company for the year to 31 December 2009.
2. Prepare a statement of financial position for the company as at 31 December 2009.
3. Prepare a cash flow statement for the company for the year to 31 December 2009, using the indirect method and in accordance with IAS 7.
4. Discuss what inferences can be drawn from the above three statements in relation to the company’s financial position.

Below, you will find two important documents: the opening statement...