In order for Dillon to understand the reasons for the decrease in cash:

a. Prepare a draft cash flow statement for the month of August 20X8. Show all workings. You are not required to prepare a reconciliation of profit to net cash provided by operating activities but may do so if you wish.

b. Provide an explanation as to the key reason why the cash has decreased during the month of August.

c. Suggest two ways that ASD could have avoided the decrease in cash during the month of August.

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Current assets Cash Accounts receivable Inventory Non-current assets Property, plant and equipment (PPE) Accumulated depreciation - PPE Total assets Current liabilities Accounts payable Accrued expenses Income tax payable Non-current liabilities Bank loan Total liabilities Net assets Shareholders' funds Share capital Armadillo Surf Designs Ltd Draft Balance Sheet as at 31 August 20X8 August ($000) Reserves Retained earnings Total shareholders' funds 3 860 4 680 1980 10 520 12 328 (3 814) 8514 19,034 3 650 473 945 5.088 4.768 9 838 9.198 5 568 750 2.880 9.198 July ($000) 4 588 4 620 2450 11 658 9 678 (3 766) 5 912 17 570 3 247 492 945 4 684 4.268 8 952 8618 5 568 750 2 300 8 618