To determine the amount of cash paid during the period for Diks Company, we can use the cash flow equation that relates the opening balance, closing balance, cash received, and cash paid. The equation can be expressed as follows:
Cash Flow Equation:
[ \text{Closing Balance} = \text{Opening Balance} + \text{Cash Received} - \text{Cash Paid} ]
Step-by-Step Explanation
- Identify the Given Values:
- Opening Balance = #12,202
- Closing Balance = #15,300
-
Total Cash Received = #40,000
-
Set Up the Equation:
We can rearrange the cash flow equation to solve for the cash paid:
[ \text{Cash Paid} = \text{Opening Balance} + \text{Cash Received} - \text{Closing Balance} ]
-
Substitute the Values:
Now, we substitute the known values into the equation:
[
\text{Cash Paid} = 12,202 + 40,000 - 15,300
]
-
Perform the Calculations:
- First, add the opening balance and cash received:
[
12,202 + 40,000 = 52,202
]
-
Next, subtract the closing balance from this sum:
[
52,202 - 15,300 = 36,902
]
-
Final Result:
Therefore, the amount of cash paid during the period is #36,902.
Explanation of Other Options
- Option B: #27,502
-
This option does not follow the cash flow equation correctly. It likely results from incorrect arithmetic or misunderstanding of how to rearrange the equation.
-
Option C: #12,498
-
This option is also incorrect. It may arise from miscalculating the total cash flow or misunderstanding the relationship between the opening and closing balances.
-
Option D: #43,098
- This option is incorrect as well. It suggests an incorrect understanding of the cash flow dynamics, possibly by misapplying the cash flow equation or miscalculating the total cash received.
Common Pitfalls
- Misunderstanding the Cash Flow Equation: Students may confuse the relationships between cash received, cash paid, and the balances.
- Arithmetic Errors: Simple addition or subtraction mistakes can lead to incorrect answers.
- Ignoring the Direction of Cash Flows: Remember that cash received increases the balance, while cash paid decreases it.
Revision Summary
- Use the cash flow equation: Closing Balance = Opening Balance + Cash Received - Cash Paid.
- Rearrange the equation to find cash paid: Cash Paid = Opening Balance + Cash Received - Closing Balance.
- Carefully perform arithmetic operations to avoid errors.
- Understand the flow of cash: cash received increases the balance, while cash paid decreases it.
By following these steps and understanding the relationships involved, you can accurately determine cash flows in financial accounting scenarios.