Cleanex (Pty) Ltd is a household cleaning brand who manufactures and sells a range of products, including soap, dishwashing liquids, handwashing liquids, and fabric softeners. The financial accountant is preparing the statement of cash flows, using the indirect method for the financial year-end 31 December 2023.

1) Discuss why the operating activities section in the statement of cash flows is important to the users of the financial statement and provide three examples of operating activities.

2) Prepare only the operating activities section of the statement of cash flows of Cleanex (Pty) Ltd for the financial year end 31 December 2023, using the indirect method in accordance with IAS 7, Statement of Cash Flows.
 

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An extract from the trial balance is as follows: Debit 2023 Profit before tax Income tax expense Inventory Accounts receivable Allowance for credit losses Prepaid selling expenses Bank Accounts payable Electricity expense accrued Interest accrued Income tax payable 800 250 826 000 175 500 15 000 1 225 000 Credit 2023 2 850 000 6 000 167 750 11 000 7 000 800 250 Debit 2022 815 000 167 800 13 000 1 210 000 Credit 2022 5 000 57 600 14 000 6 000 782 000 An extract from the trial balance is as follows: Debit 2023 Profit before tax Income tax expense Inventory Accounts receivable Allowance for credit losses Prepaid selling expenses Bank Accounts payable Electricity expense accrued Interest accrued Income tax payable 800 250 826 000 175 500 15 000 1 225 000 Credit 2023 2 850 000 6 000 167 750 11 000 7 000 800 250 Debit 2022 815 000 167 800 13 000 1 210 000 Credit 2022 5 000 57 600 14 000 6 000 782 000