On Time Ltd is a parcel delivery business. Detailed below is selected information for the financial year ending 30 June 2018. 

                                               

Item	$
Interest paid for the year	4,000
Dividends paid to Shareholders	30,000
Profit on sale of truck	25,000
Cash at bank at July 1, 2017	1,000,000
Depreciation for the year	150,000
Payment for Motor vehicle purchased on 28th April 2018	40,000
Loan repayments made	70,000
Tax expense / paid to the Tax Office	78,000
Salaries Paid	250,000
Cash received from the sale of a truck	90,000
Delivery Income  Cash Receipts for year ending 30 June 2018	650,000
Dividend received from investment	200,000
Cash for Shares in companies listed on the ASX (Australia Security Exchange)	50,000
Cash received from accounts receivable customers	300,000
Bad Debts expense	10,000
Other cash operating expenses	77,000
Credit purchases of fuel for the year ending 30 June 2018	480,000
Fuel Stock  petrol 1/7/2017	400,000
Fuel Stock  petrol 30/6/2018	150,000
Payments to suppliers for prior purchases on credit	200,000
Delivery Income - On Credit to account customers for the year ending 30 June 2018	150,000
Money borrowed from Net Bank	50,000
Purchase of property and land for cash	700,000

 REQUIRED 

1.  
2. Prepare a fully classified income statement and cash flow statement for the year ending 30 June 2018 based on the information above. Fully state any assumptions you have made in preparing these financial reports.
3.  

 

1.  
2. Upon completing the cash flow and income statement On Time management are confused in that the Income Statement is indicating they made a net loss (negative profit) over the same period whilst reporting a positive cash inflow from operations. With reference to the question and your work in answering (a) above explain to On Time management providing two possible reasons why this discrepancy could occur when comparing cash flow from operations (cash profit) with accrual accounting profit/ loss. For each cause identified high light the impact on profit versus cash flow to explain potential differences 
3.  

 

1.  
2. Given the above differences discuss which statement (Income Statement or Cash Flow from Operations) better reflects the financial performance / wealth creation for the period ending 30 June 2016. (Justify your answer with reference to accrual accounting) (80 word limit)
3.