ICANFinancial AccountingStatement of Cash Flows2024

Okonkwo Retail Plc prepares its statement of cash flows using the direct method. During the year ended 30 September 2023, the following data relate to trade receivables and revenue: Revenue per income statement ₦320,000,000; Opening trade receivables ₦38,500,000; Closing trade receivables ₦44,200,000; Bad debts written off during the year ₦1,800,000. What is the cash collected from customers to be reported under operating activities?

A₦314,300,000
B₦312,500,000CORRECT
C₦325,700,000
D₦313,700,000
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Why the answer is B, and why the others tempt you.
Cash collected from customers = Revenue + Opening receivables − Closing receivables − Bad debts written off = ₦320,000,000 + ₦38,500,000 − ₦44,200,000 − ₦1,800,000 = ₦312,500,000. Bad debts written off reduce the receivables balance without generating cash, so they must be deducted. The increase in receivables of ₦5,700,000 and the write-offs of ₦1,800,000 together reduce cash collected below revenue.
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