## Working Notes: T-Account Method
For every balance sheet item that changes during the year and is relevant to CFS, prepare a T-account to find hidden cash amounts (especially purchases, sales, and payments).
---
### PPE (Fixed Assets) T-Account
```
PPE Account
Dr Cr
Opening balance X | Sale (at Book Value) X
Purchases (CIB/bal) X | Depreciation X
| Write-off X
| Closing balance X
```
Deriving Book Value of sold asset:
- Sale at profit: Book Value = Sale Proceeds − Profit
- Sale at loss: Book Value = Sale Proceeds + Loss
Finding hidden purchase (balancing figure):
Purchase = Closing + BV of sold + Depreciation + Write-off − Opening
---
### Investment T-Account
```
Investment Account
Dr Cr
Opening balance X | Sale (at Book Value) X
Purchases X | Closing balance X
```
Profit/Loss on sale goes to P&L, not to this T-account.
---
### Provision for Tax T-Account
```
Provision for Tax
Dr Cr
Tax paid (bal. fig.) X | Opening provision X
Closing provision X | P&L charge (CY) X
```
Tax Paid = Opening + P&L charge − Closing
This is the actual cash outflow for income tax.
---
### P&L Reserve T-Account (to derive PBT)
```
P&L Reserve
Dr Cr
Transfer to GR X | Opening balance X
Dividend declared X | PBT (bal. fig.) X
Provision for tax X |
Closing balance X |
```
PBT = Closing − Opening + GR Transfer + Dividend declared + Provision for Tax
---
### Dividend Payable T-Account
```
Dividend Payable
Dr Cr
Dividend paid (bal.) X | Opening balance X
Closing balance X | Dividend declared X
```
---
### Debenture T-Account (for redemption details)
```
9% Debentures
Dr Cr
Redemption (face) X | Opening balance X
Closing balance X | Fresh issue X
```
Interest = Carrying amount × Rate (may be a hidden figure found from P&L analysis).
---
### Key Principle
> Every cash flow must trace back to a T-account entry. If a figure cannot be placed in a T-account, question whether it has been classified correctly.