Question 1

**Section B — Multi-Task Scenario 1 (Budgeting)**

*Scenario: AquaVitae Public Utility*
AquaVitae manages water desalination plants. You are preparing the cash budget for Quarter 2.

**Forecast Data for Quarter 2:**
- Water Sales Revenue: $850,000 (All received in cash in Q2)
- Government Grant: $150,000 (Approved in Q1, cash to be received in Q2)
- Operating Costs: $420,000 (This figure includes $40,000 for depreciation of plant machinery. All other operating costs are paid in cash in Q2)
- Capital Expenditure: $200,000 (New filtration system, paid in cash in Q2)
- Interest Payment on Loan: $25,000 (Paid in cash in Q2)

**Task:**
Calculate the Net Cash Flow for Quarter 2.

*(Enter your answer as a whole number. If negative, include a minus sign)*

Accepted Answer

1. Sum all cash receipts (Sales + Grant).
2. Sum all cash payments. Remember to exclude non-cash items like depreciation from the operating costs (420k - 40k = 380k cash operating costs).
3. Add Capital Expenditure and Interest to payments.
4. Net Cash Flow = Total Receipts - Total Payments.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Including the $40,000 depreciation as a cash outflow, which would incorrectly result in a net cash flow of $355,000.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA MA — Management Accounting Practice Exam 6

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