ACCA FR December 2026: Why Your Cash Flow Statement Figures Are Wrong (PPE and Tax Paid)
The two cash flow lines students get wrong most are purchases of PPE and tax paid, because they copy a number from the P&L or the SOFP instead of building it with a working. Build both from the ledger accounts and you protect the marks.
Why the shortcut fails
In FR, the statement of cash flows question gives you two statements of financial position and a pile of notes. The cash figures you need are never printed. You derive them. The examiner's marks sit on the workings, so a figure lifted straight from the P&L or from a SOFP movement picks up the wrong number and loses the method marks too.
The PPE trap is the common one. The SOFP movement in PPE is not cash spent. It also contains depreciation, any revaluation surplus and any disposals. Miss one and your investing section is wrong, and so is the closing cash reconciliation.
The tax trap is smaller but just as repeatable. The P&L tax charge is an expense. Cash paid is the opening liability plus the charge, less the closing liability. Deferred tax movements need the same treatment if they are in the charge.
Wrong vs right: PPE
Opening PPE carrying amount $500k, closing $620k. Depreciation $80k, revaluation surplus $40k, and an asset with a carrying amount of $30k sold for $35k.
Wrong: 620 − 500 + 80 = $200k purchased. This ignores the revaluation and the disposal.
Right: a PPE working. Opening 500 + revaluation 40 + additions X − depreciation 80 − disposal 30 = closing 620. Additions X = $190k. That goes in investing as a $190k outflow, and the $35k proceeds go in as a separate inflow.
Wrong vs right: tax paid
Opening tax liability $45k, P&L charge $60k, closing liability $50k.
Wrong: tax paid $60k, the figure from the P&L.
Right: 45 + 60 − 50 = $55k paid.
What to do
1. Open a working for every non-cash line. PPE, tax, finance costs, dividends and any loan movements each get a mini ledger account. Cash is the balancing figure.
2. Strip the profit-before-tax reconciliation first. Add back depreciation, the loss or profit on disposal and finance costs before you touch working capital, so those items are not counted twice.
3. Prove it. Your net movement in cash must agree to the SOFP change in cash and cash equivalents. If it does not, one of your workings is wrong, and you will find it quickly because there are only a handful.
Bottom line
The statement of cash flows is a mechanical question that rewards a tidy set of workings. Draw the T-accounts, and the marks follow.